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<CONFORMED-NAME>DIGITAL DESCRIPTOR SYSTEMS INC
<CIK>0000927454
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<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
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<ACT>33
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<FILM-NUMBER>02786347
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<STREET1>2010F CABOT BLVD WEST
<CITY>LANGHORNE
<STATE>PA
<ZIP>19047
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<ZIP>19047
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<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form SB-2

                                 Amendment No. 5

                             Registration Statement
                                      Under
                           The Securities Act of 1933

                        Digital Descriptor Systems, Inc.
                 (Name of small business issuer in its charter)


         Delaware                           7373                23-2770048
         --------                          ------               ----------
(State or other jurisdiction of (Primary Standard Industrial  (I.R.S. Employer
 incorporation or organization)  Classification Code Number) Identification No.)


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


         Registrant's Address and Telephone number, including area code:

                              Michael J. Pellegrino
                      President and Chief Operating Officer
                               446 Lincoln Highway
                            Fairless Hills, PA 19030
                                 (267) 580-1075

            (Name, address and telephone number of Agent for Service)

                          Copies of communications to:

                              Owen Naccarato, Esq.
                             Naccarato & Associates
                           19600 Fairchild, Suite 260
                            Irvine, California 92612
                                 (949) 851-9261

         Approximate date of commencement of proposed sale to the public: As
         soon as practicable after the registration statement becomes effective.

         If any of the securities being registered on this Form are to be
         offered on a delayed or continuous basis pursuant to Rule 415 under the
         Securities Act of 1933, check the following box. [X]

         If this Form is filed to register additional securities for an offering
         pursuant to Rule 462(b) under the Securities Act, check the following
         box and list the Securities Act registration statement number of the
         earlier effective registration statement for the same offering. [ ]

         If this Form is a post-effective amendment filed pursuant to Rule
         462(c) under the Securities Act, check the following box and list the
         Securities Act registration statement number of the earlier effective
         registration statement for the same offering. [ ]

         If this Form is a post-effective amendment filed pursuant to Rule
         462(d) under the Securities Act, check the following box and list the
         Securities Act registration statement number of the earlier effective
         registration statement for the same offering. [ ]

         If delivery of the prospectus is expected to be made pursuant to Rule
         434, check the following box. [ ]





<PAGE>

Calculation of registration fee
<TABLE>
<CAPTION>
--------------------------- --------------- -------------- -------------- ------------ -------------- ---------------
                                            Proposed       Proposed
                                            maximum        maximum        Exercise                    Amount of
Title of each class of      Amount to be    offering price aggregate      price per    Proceeds to    registration
securities to be registered registered      per share (1)  offering price share (1)    the Company    fee
--------------------------- --------------- -------------- -------------- ------------ -------------- ---------------
<S>                         <C>             <C>            <C>            <C>          <C>            <C>
Common  Shares, par value
$.001 underlying secured    50,000,000 (2)      $.02       $1,000,000                                 $92.20
convertible debenture        1,820,634 (3)      $.02       $   36,413                                 $ 3.35
--------------------------- --------------- -------------- -------------- ------------ -------------- ---------------
Shares underlying warrants     111,000 (4)                                $.02            $2,220      $  .20
--------------------------- --------------- -------------- -------------- ------------ -------------- ---------------

Restricted Common           10,253,207 (5)      $.03       $  228,064                                 $20.98
Shares par value $.001


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




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

Total Registration Fee                                                                                $116.73(6)


--------------------------- --------------- -------------- -------------- ------------ -------------- ---------------
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
(2) Common stock issuable upon conversion of an aggregate of $500,000 in
    convertible debentures issued in connection with a December 31, 2001
    financing to various investors.
(3) Common stock issuable upon conversion of a $40,000 convertible note issued
    in May, 2001.
(4) Common stock issuable upon the conversion of warrants issued in connection
    with the May, 2001 convertible note.
(5) Restricted Common stock issued with registration rights.
(6) Previously paid with original filing on 2/13/02 file #333-82662
                              ---------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effectiveness date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said section 8(a), may determine.














The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.






                                        2
<PAGE>

     PROSPECTUS

October 10, 2002

                        Digital Descriptor Systems, Inc.

                        62,184,841 Shares of Common Stock


           o      The 62,184,841 shares of Common Stock offered by this
                  Prospectus are being offered for resale by the stockholders
                  listed in the section of this Prospectus called "Selling
                  Security Holders".

           o      Our Common Stock is traded on the OTC Bulletin Board under the
                  symbol "DDSI.OB".

           o      October 4, 2002 the closing bid price of our Common Stock on
                  the OTC Bulletin Board was $0.004.

           o      At the current market price of $0.004, 135,000,000 shares of
                  the Company's common stock would be needed to convert the
                  $540,000 in convertible notes covered by this registration
                  statement. The company's shareholders will need to increase
                  its number of authorized common shares of 150,000,000 by a
                  minimum of 47,200,000 for a total of 197,200,000 authorized
                  shares to meet this commitment.

           o      We have filed a Preliminary Proxy requesting an increase of
                  authorized shares to 750,000,000 shares of common stock. Once
                  the increase in shares is authorized, we will file a
                  registration statement to provide for the shortfall in
                  registered shares.

           o      Investors should not purchase these shares unless they can
                  afford to lose their entire investment.

           o      Selling shareholders will sell at prices they fix or negotiate
                  and the selling shareholder will receive all proceeds from the
                  sale.



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

This investment involves a high degree of risk. See the "Risk Factors" beginning
on page 6 of this Prospectus.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.








                                        3
<PAGE>



<TABLE>
<CAPTION>
                                                  Table of Contents


--------------------------------------------------------------------------------------------------------- ----------
                                             Section Title                                                Page No.
--------------------------------------------------------------------------------------------------------- ----------
<S>                                                                                                       <C>
Summary of Information in the Prospectus                                                                   5
--------------------------------------------------------------------------------------------------------- ----------
Risk Factors                                                                                               6
--------------------------------------------------------------------------------------------------------- ----------
Dividend Policy                                                                                           11
--------------------------------------------------------------------------------------------------------- ----------
Dilution                                                                                                  13
--------------------------------------------------------------------------------------------------------- ----------
Use of Proceeds                                                                                           13
--------------------------------------------------------------------------------------------------------- ----------
Price Range of Common Stock                                                                               14
--------------------------------------------------------------------------------------------------------- ----------
Management's Discussion and Analysis of Financial Condition and Results of Operations                     16
--------------------------------------------------------------------------------------------------------- ----------
Our Business                                                                                              22
--------------------------------------------------------------------------------------------------------- ----------
Management                                                                                                30
--------------------------------------------------------------------------------------------------------- ----------
Executive Compensation                                                                                    33
--------------------------------------------------------------------------------------------------------- ----------
Certain Relationships and Related Transactions                                                            36
--------------------------------------------------------------------------------------------------------- ----------
Security Ownership of Certain Beneficial Owners and Management                                            36
--------------------------------------------------------------------------------------------------------- ----------
Description of Securities                                                                                 37
--------------------------------------------------------------------------------------------------------- ----------
Selling Stockholders                                                                                      40
--------------------------------------------------------------------------------------------------------- ----------
Plan of Distribution                                                                                      43
--------------------------------------------------------------------------------------------------------- ----------
Legal Proceedings                                                                                         44
--------------------------------------------------------------------------------------------------------- ----------
Experts                                                                                                   45
--------------------------------------------------------------------------------------------------------- ----------
Legal Matters                                                                                             46
--------------------------------------------------------------------------------------------------------- ----------
Other Available Information                                                                               46
--------------------------------------------------------------------------------------------------------- ----------
Financial Statements                                                                                      46
--------------------------------------------------------------------------------------------------------- ----------
Indemnification                                                                                           48
--------------------------------------------------------------------------------------------------------- ----------









                                                          4
</TABLE>
<PAGE>




                               Prospectus Summary

This summary contains all material terms of the offering. To understand this
offering fully, you should read the entire document carefully. Please pay
particular attention to the section entitled "Risk Factors" and the section
entitled "Financial Statements".

Unless otherwise indicated, this Prospectus assumes that any of our outstanding
options or warrants have not been exercised into shares of our Common Stock.

                        Digital Descriptor Systems, Inc.

Digital Descriptor Systems, Inc.("DDSI"), located at 446 Lincoln Highway,
Fairless Hills, PA,19030, phone number (267) 580-1075, was originally formed as
Compu-Color, Inc., in 1989 and was incorporated in Delaware in 1994.

DDSI develops, assembles and markets computer installations, consisting of
hardware and software, which capture video and scanned images, digitize the
image, link the digitized images to text and store the image and text on a
computer database which allows for transmitting the image and text by computer
or over telephone transmission lines to remote locations.

Technological Innovations
-------------------------

Imaging technology enables computers to record, store and retrieve both textual
information and visual images. DDSI's software programs utilize technology to
link textual information with images so that customers can record and retrieve
related text and images. 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 (see "Our Business" page 22).

Products
--------

The principal product of DDSI is the Compu-Capture(R) Law Enforcement Program,
which is marketed to law enforcement agencies and jail facilities. The program
captures a video or scanned image (mug shot) of a subject that is stored by
computer application along with the booking record, physical description and
other pertinent information about the subject (see "Our Business" page 23).

DDSI also markets its Fingerprint Matching System (FMS) and its Identify On
Demand System to both commercial and criminal justice markets. (see "Our
Business" page 24).

The Offering

Securities Offered                  62,184,841 Selling Security Holder Shares
                                    (see "Selling Shareholders" page 40) of
                                    which 10,253,207 shares have previously been
                                    issued as restricted stock

Common Stock Outstanding:           Prior to the Offering 58,156,490 Shares as
                                    of October 4, 2002 After the Offering
                                    110,088,124 Shares

Offering Price                      The selling shareholders can sell the shares
                                    at any price.

Use of Proceeds                     This prospectus relates to shares of our
                                    common stock that may be offered and sold
                                    from time to time by the selling
                                    stockholders. We will not receive any
                                    proceeds from the sale of shares by the
                                    selling shareholders. However, we will
                                    receive proceeds upon the exercise of any
                                    warrants that may be exercised by the
                                    selling shareholders. These funds will be
                                    used for ongoing operations.

Market for our Common Stock:        Our Common Stock trades on the Over-the
                                    Counter Bulletin Board, also called OTCBB,
                                    under the trading symbol "DDSI.OB". The
                                    market for our Common Stock is highly
                                    volatile. We can provide no assurance that
                                    there will be a market in the future for our
                                    Common Stock.







                                        5
<PAGE>

                                  Risk Factors

An investment in shares of DDSI's Common Stock involves a high degree of risk.
You should carefully consider the following information which summarizes all
material risks, together with the other information contained in this
prospectus, before you decide to buy DDSI's common stock. If any of the
following risks actually occur, DDSI's business would likely suffer. In these
circumstances, the market price of DDSI's common stock could decline, and you
may lose all or part of your investment.

Risks Relating to our Business:
-------------------------------

DDSI has sustained continuing losses making it a risky investment.

DDSI has a history of losses from operations and does not anticipate realizing a
profit during the next fiscal year, therefore investment in DDSI is at a risk of
being lost. Our financial statements highlight that we have a working capital
deficiency of $791,543 at December 31, 2001 and $731,891 at December 31, 2000,
plus recurring losses from operations which raise substantial doubt about our
ability to continue as a going concern. For the quarter ending March 31, 2002 we
have a working capital deficiency of $140,184. The financial statements do not
include any adjustments that might result from the outcome of this activity.

DDSI incurred a loss for the year ending December 31, 2001 of $2,982,510 and a
loss of $2,030,052 in the year ending December 31, 2000, and for the six months
ending June 30, 2002 of $896,520 and a loss of $1,303,638 for the six months
ending June 30, 2001. DDSI does not anticipate realizing a profit during the
next fiscal year.

In addition, any one of the following factors may affect the future
profitability of our business:

    o The inability to develop new products to sell to the current customer base
    o Failure to establish new outlets for sales of the current solutions and
      products.
    o Rejection of its modified criminal justice software solutions by the
      commercial market.

DDSI may not be able to obtain sufficient capital to fund our operations and, as
a result, we may have to cut back or discontinue operations or limit our
business strategies.

DDSI does not have adequate financing arrangements in place. DDSI intends to
raise additional capital by looking for alternative financing solutions for its
long term needs and new development projects. If DDSI is unable to obtain
alternative financing solutions, it may have to rely on private placement or
convertible notes.

Future financing may also be difficult to obtain due to such factors as our
history of unfavorable operating results, and increased stockholder dilution. If
adequate funds are not available, we may be required to cut back on one or more
of our production locations, sales, marketing or distribution programs or plans
to reduce operating expenses, or attempt to obtain funds through strategic
alliances that may require us to relinquish rights to our technologies or
products, and further dilute our shareholders.

Our need for future capital requirements will depend on many factors, including:

                o        the future of our product sales, marketing and
                         distribution efforts;

                o        cost increases in the progress of filing for and
                         obtaining regulatory approvals;

                o        any market rejection of our products;

                o        any increase in the levels of administrative and legal
                         expenses

On the other hand, if debt financing is available, it may have several negative
effects on our future operations, including:




                                        6
<PAGE>


                o     a portion of our cash flow from operations will be
                      dedicated to payment of principal and interest and this
                      would reduce the funds available for operations and
                      capital expenditures;

                o     increased debt burdens will substantially increase our
                      vulnerability to adverse changes in general economic and
                      competitive conditions; and

                o     we may be subject to restrictive debt covenants and other
                      conditions in our debt instruments that may limit our
                      capital expenditures, limit our expansion or future
                      acquisitions, and restrict our ability to pursue our
                      business strategies.

DDSI's ability to produce revenue is dependent on its ability to attract new
customers, and it's inability to do so would result in DDSI trimming or shifting
down operations.

Once a customer has purchased a system from DDSI, any future revenue from that
customer will consist primarily of maintenance fees and upgrades to the system
unless the customer expands the system or DDSI develops new products for the
system. Thus DDSI's ability to produce revenue is dependent on the following:

                o     its ability to attract new customers
                o     its ability to develop new products and upgrade of
                      existing products to reflect current technology
                o     its ability to price products competitively.

The majority of DDSI's revenues are generated from one time sales to different
clients of its software product. These sales account for 59% of the business in
2001. If DDSI is unable to attract new customers, it would therefore suffer a
significant decrease in revenue resulting in a cut back or shut down of
operations.

The remaining revenue consists of contract sales in DDSI's maintenance and
services areas. Though these are recurring revenues, they are not enough to
sustain operations.

Purchases of DDSI's products can be delayed due to political and budgetary
processes within Law enforcement jurisdictions, which can hamper DDSI's ability
to operate.

Law enforcement jurisdictions are subject to political, fiscal and budgetary
constraints and purchases of DDSI's products may be delayed substantially due to
these political and budgetary processes. The nature of the public sector market
and the government procurement process often result in an irregular and
unpredictable revenue stream for DDSI. This irregular and unpredictable revenue
stream makes it difficult for the business to operate smoothly.

Satisfying public contract requirements can preclude sales, which may limit
DDSI's ability to succeed.

DDSI's Compu-Capture(R) product is being marketed primarily to law enforcement
agencies. As public agencies, these prospective purchasers are subject to public
contract requirements that vary from one jurisdiction to another. Some public
contract requirements may be onerous or even impossible for DDSI to satisfy,
such as large bonding requirements, and DDSI may be precluded from making sales
in these jurisdictions. In addition, public contracts frequently are awarded
only after a formal competitive bidding process. This process is usually a long
drawn out process.


The Compu-Scan 3000 may never achieve FBI certification, which could limit our
success.





                                        7
<PAGE>

Under federal regulation, law enforcement agencies in the United States may only
utilize fingerprint systems that have passed an extensive FBI certification
process. As a result any contactless and inkless fingerprint system developed by
DDSI must pass the FBI certification process before it can be distributed to law
enforcement agencies in the United States. The FBI Appendix F requirements are
quite voluminous and detailed; however, they are available at the FBI Web Site
(http://www.fbi.gov/hq/cjisd/iafis/efts70/cover.htm).

Each time DDSI has submitted the Compu-Scan for certification, the FBI has
requested additional information. This has resulted in DDSI's decision to
investigate a redesign of the Compu-Scan 3000. There are no assurances by the
Company that the FBI will certify this latest technology and device should DDSI
submit a redesign.

During December 2001, the Company revised its anticipated certification date for
its Compu-Scan 3000 product indefinitely after its submission was not accepted
by the FBI. Additionally, there are no assurances that the FBI will ever certify
the technology. As such, and since the Company is unable to forecast any
revenues from the product, the Company wrote off the remaining investment in
Software Development of $298,714 in the fourth quarter of 2001.

DDSI may not be able to raise sufficient funding to complete the Compu-Scan 3000
project, resulting in terminating the project which would have a negative affect
on future operations of the company, thus putting the investors at risk

If DDSI is unable to raise sufficient funding to complete the Compu-Scan 3000
project, the Company will either continue with the original design of the
fingerprint slap. However, the Company has recently put a substantial amount of
funds into the project that could have been used to develop revenues in other
areas.

The pledge of substantially all of DDSI's assets could hinder the raising of
funds which would eventually result in the discontinuation of operations

Presently all of our assets have been pledged which could affect our operations
by precluding us from obtaining additional financing. The inability to gain
access to secured funding in the future could result in the abandonment of
projects, curtailment of operations and eventually the discontinuation of
operations.

If DDSI defaults in one of the conditions to the debenture agreement, at the
note holder's option, the full principal amount of the debenture(s) together
with interest and other amounts owed may become immediately due and payable in
cash. If this event were to occur, it would probably result in the shut down of
DDSI's operations.

         DDSI would be in default if any one of the following occurs:
         (i)      failure in making a payment of the principal and interest;
         (ii)     files for bankruptcy or insolvency;
         (iii)    defaults in any of its other debt obligations;
         (iv)     DDSI's Common Stock shall not be eligible for quotation and
                  trading on the OTC Bulletin Board;
         (v)      DDSI sells or disposes all or in excess of 33% of its assets
                  in one or more transactions;
         (vi)     if the effectiveness of the Underlying Shares Registration
                  Statement lapses;
         (vii)    the Company shall fail to deliver certificates to a Holder
                  within three days of conversion request.

We are presently in compliance with all conditions of the debenture agreement
and anticipate that we will stay in compliance with the conditions while this
prospectus is in use.


We have a "Going-Concern Qualification" in our independent auditors financial
statement report at December 31, 2001, which may make capital raising more
difficult and may require us to scale back or cease operations, putting an
investors funds at risk.





                                        8
<PAGE>

The report of our auditors includes a going concern qualification which
indicates an absence of obvious or reasonably assured sources of future funding
that will be required by us to maintain ongoing operations. To date we have
funded DDSI through equity investments and issues of debt. There is no guarantee
that DDSI will be able to attract additional equity and/or debt investors. If we
are unable to obtain additional funding, we may not be able to continue
operations. Additionally, we have a net worth deficit as of December 31, 2001.
This deficit indicates that we will be unable to meet our future obligations
unless additional funding sources are obtained.

DDSI's operating expenses for the year ended December 31, 2001 ran approximately
$2,681,080 with cash outflows of approximately $174,615 a month. A temporary cut
back in operations would lower the expenses dramatically, however, cash outflow
would still remain approximately $51,700 to $60,000 a month. Absent a plan to
obtain the necessary funds to maintain DDSI during a temporary shutdown, DDSI
would have to terminate all operations.

DDSI plans to raise additional funding by looking for alternative financing
solutions for its long term needs and new development projects. If DDSI is
unable to obtain alternative financing solutions, it may depend on private
placement or convertible notes.

We have received notification of a threatened shareholder lawsuit which would
require capital needed for operations to defend.

On January 18, 2002, DDSI's Board of Directors received notification of a
threatened lawsuit from a shareholder who purchased shares pursuant to a private
placement offering in October 2001. The notification alleged that false and
misleading representations were made to Mr. Robert Martin by Mr. Garrett Cohn
(past CEO) and Mr. Scott Gallagher (About Face Communications) involving the
convertible debenture funding.

The shareholder threatened a direct and derivative action suggesting the
convertible debt was not legally authorized (see legal proceedings).

Risks Relating to our Stock:

The issuance of these shares in this offering will result in dilution.

There are a large number of shares underlying the convertible notes and warrants
in this offering that may be available for future sale and the sale of these
shares may depress the market price of our common stock and may cause
substantial dilution to our existing stockholders.

The number of shares of common stock issuable upon conversion of the convertible
notes and debentures in this offering may increase if the market price of our
stock declines. All of the shares, including all of the shares issuable upon
conversion of the notes and debentures and upon exercise of our warrants, may be
sold without restriction. The sale of these shares may adversely affect the
market price of our common stock. The issuance of shares upon conversion of the
convertible notes and debentures and exercise of outstanding warrants will also
cause immediate and substantial dilution to our existing stockholders and may
make it difficult to obtain additional capital.

The following gives examples of the number of shares that would be issued if the
debentures in this offering were converted at one time at prices representing
70%, 50%, and 25% of the current market price (assuming a market price of
$0.01): As of October 4, 2002, we had 58,156,490 shares of common stock
outstanding.






                                        9
<PAGE>

         o        70% of current stock price:

                  DDSI's stock converted at 70% of current stock price would
                  result in a debenture conversion rate of $.007 cents. To
                  convert the $500,000 of convertible debentures would require
                  71,428,571 shares of DDSI's common stock, or 123% of DDSI's
                  current outstanding shares.

         o        50% of current stock price:

                  DDSI's stock converted at 50% of current stock price would
                  result in a debenture conversion rate of $.005 cents. To
                  convert the $500,000 of convertible debentures would require
                  100,000,000 shares of DDSI's common stock, or 172% of DDSI's
                  current outstanding shares.

         o        25% of current stock price

                  DDSI's stock converted at 25% of current stock price would
                  result in a debenture conversion rate of $.0025 cents. To
                  convert the $500,000 of convertible debentures would require
                  200,000,000 shares of DDSI's common stock, or 344% of DDSI's
                  current outstanding shares.


                  At the current market price at October 4 2002 of $0.004,
                  135,000,000 shares of the Company's common stock would be
                  needed to covert the $540,000 in convertible notes covered by
                  this registration statement. To meet this commitment the
                  Company will need to increase its number of authorized shares.
                  The Company currently has 150,000,000 shares authorized. We
                  have filed a Preliminary proxy requesting an increase of
                  authorized shares to 750,000,000 shares of common stock. Once
                  the increase in shares is authorized, we will file a
                  registration statement to provide for the shortfall in
                  registered shares.

DDSI may not gain shareholder approval for the increase in authorized shares
which could result in the shutdown of operations.

The failure to increase the number of authorized shares would result in DDSI's
inability to fulfill its contractual commitment to the convertible note holders
to increase its number of authorized shares. This inability to convert the notes
would trigger the default clause contained in the notes. The default clause
requires a cash payment, which DDSI would not be able to meet. Contractually
DDSI would be obligated to pay the note holders a default payment amounting to
the then outstanding principal amount of the notes plus accrued and unpaid
interest on the unpaid principal amount of the note plus a pro-rated default
interest of 24% of the default payment amount. In addition, DDSI may be subject
to liquidated damages as a result of an inability to honor a note holder's
conversion request. The inability of DDSI to meet its contractual obligations to
the note holders would most likely result in some sort of legal action from the
note holders, which would result in the shutdown of operations.

DDSI's overhang affect of the selling shareholders resale of their securities on
the market could result in lower stock prices when converted

Overhang can translate into a potential decrease in DDSI's market price per
share. The common stock underlying unconverted debentures represents overhang.
These debentures are converted into common stock at a discount to the market
price providing the debenture holder the ability to sell his or her stock at or
below market and still make a profit. If the share volume cannot absorb the
discounted shares, DDSI's market price per share will likely decrease. As the
market price decreases, each subsequent conversion will require a larger
quantity of shares.

Currently DDSI has reserved 100% of the estimated maximum number of shares of
common stock which would be issuable upon conversion in full of the debentures
and warrants in the current financing, amounting to 50,000,000 shares of
authorized and unissued common stock. These reserve amounts are our good faith
estimate of the number of shares that we believe we need to reserve. We can
provide no assurance as to how many shares we will ultimately need to issue upon
the conversion of the debentures. If we are required to issue additional shares,
we will be required to file an additional registration statement for those
shares.






                                       10
<PAGE>

Short selling common stock by warrant and debenture holders may drive down the
market price of our stock.

Warrant and debenture holders may sell shares of DDSI's common stock on the
market before exercising the warrant or converting the debenture. The stock is
usually offered at or below market since the warrant and debenture holders
receive stock at a discount to market. Once the sale is completed the holders
exercise or convert a like dollar amount of shares. If the stock sale lowered
the market price, upon exercise or conversion, the holders would receive a
greater number of shares then they would have absent the short sale. This
pattern may result in the spiraling down of our stock's market price.

DDSI's absence of dividends or the ability to pay them places a limitation on
any investors return.

DDSI anticipates that for the foreseeable future, earnings will be retained for
the development of its business. Accordingly, DDSI does not anticipate paying
dividends on the Common Stock in the foreseeable future. The payment of future
dividends will be at the sole discretion of DDSI's Board of Directors and will
depend on the Company's general business condition.

DDSI's reliance on the exercise of common stock purchase options/warrants to
fund the operating needs of the Company. If these options/warrants were
unacceptable to the service provider, then DDSI may have to curtail operations.

DDSI often does not have the liquid fund to pay for services. In cases when
services are needed and funds are short, DDSI would issue stock purchase options
in lieu of cash. If options are not found acceptable by the service provider,
the needed service would not be completed. Depending on how critical the service
is, DDSI may have to curtail or shut down operations. DDSI's warrants would face
similar issues, in that if the underlying common stock is undesirable to the
service provider, then the warrants will not be exercised, resulting in the
service not being performed which could cause a curtailment or lead to an
eventual shutdown of operations.

DDSI's common stock is subject to the "Penny Stock" rules of the SEC and the
trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.

Our shares of Common Stock are "penny stocks" as defined in the Exchange Act,
which are traded in the over-the-counter market on the OTC Bulletin Board. As a
result, an investor may find it more difficult to dispose of or obtain accurate
quotations as to the price of the shares of the Common Stock being registered
hereby. In addition, the "penny stock" rules adopted by the Commission under the
Exchange Act subject the sale of the shares of the Common Stock to certain
regulations which impose sales practice requirements on broker-dealers. For
example, broker-dealers selling such securities must, prior to effecting the
transaction, provide their customers with a document that discloses the risks of
investing in such securities. Included in this document are the following:

    o    The bid and offer price quotes for the penny stock, and the number of
         shares to which the quoted prices apply.
    o    The brokerage firm's compensation for the trade.
    o    The compensation received by the brokerages firm's salesperson for
         the trade.

In addition, the brokerage firm must send the investor:

    o    Monthly account statement that gives an estimate of the value of each
         penny stock in your account.
    o    A written statement of your financial situation and investment goals.




                                       11

<PAGE>

Legal remedies which may be available to you are as follows:

    o    If penny stocks are sold to you in violation of your rights listed
         above, or other federal or state securities laws, you may be able to
         cancel your purchase and get your money back.
    o    If the stocks are sold in a fraudulent manner, you may be able to sue
         the persons and firms that caused the fraud for damages.
    o    If you have signed an arbitration agreement, however, you may have to
         pursue your claim through arbitration.

If the person purchasing the securities is someone other than an accredited
investor or an established customer of the broker-dealer, the broker-dealer must
also approve the potential customer's account by obtaining information
concerning the customer's financial situation, investment experience and
investment objectives. The broker-dealer must also make a determination whether
the transaction is suitable for the customer and whether the customer has
sufficient knowledge and experience in financial matters to be reasonably
expected to be capable of evaluating the risk of transactions in such
securities. Accordingly, the Commission's rules may limit the number of
potential purchasers of the shares of the Common Stock.

Resale restrictions on transferring "penny stocks" are sometimes imposed by some
states, which may make transactions in our stock cumbersome and may reduce the
value of an investment in our stock.

Various state securities laws impose restrictions on transferring "penny stocks"
and as a result, investors in the Common Stock may have their ability to sell
their shares of the Common Stock impaired. For example, the Utah Securities
Commission prohibits brokers from soliciting buyers for "penny stocks", which
makes selling them more difficult.

Information about forward-looking statements
--------------------------------------------

This Prospectus contains certain forward-looking statements, which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified because the context of the statement includes words such
as "may," "will," "except," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, this prospectus also contains
forward-looking statements about our future. Forward-looking statements include
statements about our:

Plans, Objectives, Goals, Strategies, Expectations for the future, Future
performance and events, Underlying assumptions for all of the above and Other
statements which are not statements of historical facts.

These forward-looking statements involve risks and uncertainties, which could
cause our actual results to materially differ from our forward-looking
statements. We make these forward-looking statements based on our analysis of
internal and external historical trends, but there can be no assurance that we
will achieve the results set forth in these forward-looking statements. Our
forward-looking statements are expressed in good faith and we believe that there
is a reasonable basis for us to make them.

In addition to other factors discussed in this prospectus, the following are
important factors that could cause our actual results to materially differ from
our forward-looking statements:

- Our ability to respond to changes in the marketplace
- Competitive factors
- The availability of financing on terms and conditions acceptable to us
- The availability of personnel with the appropriate technical skills

We have no obligation to update or revise these forward-looking statements to
reflect future events.






                                       12
<PAGE>

Dilution

Assuming there was no change in the net tangible book value (deficit) of DDSI
after June 30, 2002 and taking into consideration 459,000 net proceeds received
from the sale of debentures our adjusted net tangible book value as determined
after the receipt of net proceeds from such maximum offering amount, totaling
($1,335,761) will be ($0.02) per share of common stock. This represents an
immediate increase in our net tangible book value of $0.01 per share of Common
Stock to the Existing Stockholders, and an immediate dilution of $0.01 per share
to the investors purchasing shares of common stock in this offering (the "New
Stockholders").

The following table illustrates this per share dilution at June 30, 2002:

<TABLE>
<S>                                                                                                     <C>
Offering Price per share of Common Stock.............................................................   $0.02

Adjusted net tangible book value (deficit) per share of
Common Stock at June 30, 2002
Before this Offering.................................................................................  ($0.02)

Increase attributable to the Offering................................................................   $0.01

Adjusted net tangible book value (deficit)
per share of Common Stock
After this Offering..................................................................................  ($0.02)

Dilution in adjusted net tangible book
Value per share of Common Stock
to New Stockholders..................................................................................   $0.01

In addition, further dilution could occur in the future due to any contracts we
may enter into with third party entities for consulting or other services should
any additional Common Stock shares be issued for those consulting or other
services.
</TABLE>

Use of proceeds
---------------

DDSI will not receive any of the proceeds from the sale of the shares of Common
Stock offered by the selling shareholders under this prospectus. If all
warrants, being registered, to purchase the shares of common stock offered for
resale in this offering were exercised, DDSI would receive aggregate gross
proceeds of approximately $2,220.

The proceeds, if any, that DDSI receives from the exercise of warrants will be
used for working capital in support of the growing business.

The foregoing represents DDSI's current best estimate of our use of the proceeds
derived from the exercise of the warrants to purchase the shares of Common Stock
offered in this prospectus, if any, based upon our present plans, the state of
our business operations and current conditions in the industry in which we
operate. DDSI reserves the right to change the use of the proceeds if
unanticipated developments in our business, business opportunities, or changes
in economic, regulatory or competitive conditions, make shifts in the
allocations of proceeds necessary or desirable.








                                       13
<PAGE>




Price Range of Common Stock
---------------------------

DDSI's Common Stock has been quoted on the OTC:BB since July 7, 1997 under the
symbol "DDSI". As of November 4, 1999 DDSI's shares traded on the pink sheets;
however, the Company returned to trading on the OTC Bulletin Board effective
February 23, 2001. The following table set forth, the high and low bid prices
for the Common Stock for the quarters indicated. As of December 31, 2001 there
were approximately 2,500 shareholders of record. The source of the quotes is AOL
Ticker.
<TABLE>
<CAPTION>
                                                                                Common Stock
                                                                                  Bid Price
                                                                                  ---------
<S>                                                                    <C>                       <C>
Calendar Year 2000                                                     Low                       High
---------------------------
First Quarter                                                          $0.21                     $0.48
Second Quarter                                                         $0.25                     $0.39
Third Quarter                                                          $0.21                     $0.35
Fourth Quarter                                                         $0.06                     $0.22

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

Calendar Year 2002                                                     Low                       High
---------------------------
First Quarter                                                          $0.007                    $0.04
Second Quarter                                                         $0.002                    $0.021
Third Quarter                                                          $0.002                    $0.01
</TABLE>

As of October 4, 2002, there were approximately 58,156,490 shares of Common
Stock issued and outstanding.







                                       14
<PAGE>




                          Summary Financial Information

The summary historical financial data should be read in conjunction with the
financial statements (and notes thereto) of our Company and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>

                                             Year ended December 31               Six Months Ended June 30
                                            2001                 2000             2002                 2001
                                            -------------------------             -------------------------
                                                    (Audited)                             (Unaudited)
<S>                                         <C>           <C>                     <C>           <C>
Net sales                                   $ 1,726,707   $ 3,026,458             $   414,158   $   725,528
Cost of revenues                                708,703     1,615,286                  82,013       269,788
General and administrative                    1,705,242     1,843,336                 510,565       917,244
Sales and marketing                             454,169       917,381                  57,238       306,561
Research and development                        383,217       536,350                 151,375       140,094
Write-off of software development costs         413,604             -                       -             -
Provision for doubtful note receivable -
    former officer                              177,400             -                       -             -
Depreciation                                    138,452       162,330                  18,214       120,666
Interest & amortization of deferred
   debt costs                                   753,029         1,775                 515,569       288,934
Other (income) expense, net                     (24,599)      (19,948)                (24,296)      (14,391)
                                            -------------------------             -------------------------
Net Loss                                    $(2,982,510)  $(2,030,052)            $  (896,520)  $(1,303,638)
                                            =========================             =========================
Weighted average Common
        Shares outstanding                   24,436,773    18,557,547              53,844,741    21,174,779
                                            =========================             =========================
Basic loss per share                        $     (0.12)  $     (0.11)            $     (0.02)  $     (0.06)
                                            =========================             =========================

Current Assets                              $ 1,629,792   $ 1,000,415             $   894,336   $ 1,629,792
Total Assets                                $ 1,691,277   $ 1,783,044             $   937,606   $ 1,691,277
Current Liabilities                         $ 2,421,335   $ 1,732,306             $ 2,501,736   $ 2,421,335
Total Liabilities                           $ 2,441,401   $ 1,760,932             $ 2,518,210   $ 2,441,401
Shareholders' equity (deficit)              $  (750,124)  $    22,112             $(1,580,604)  $  (750,124)
</TABLE>







                                       15
<PAGE>



            Management's Discussion and Analysis or Plan of Operation

Plan of Operations
------------------

         The short-term objectives of DDSI are the following:

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

         DDSI's long-term objectives are as follows:

         1.       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 FMS
                  (Fingerprint Matching System), and Identify on Demand.
         2.       Continue pursuing the FBI certification of the Compu-Scan 3000
                  fingerprint capturing device. This would include redesigning
                  the slap unit of the Compu-Scan to capture a palm print as
                  well as a fingerprint. In addition consideration will be given
                  to the creation of a contactless single digit reader that
                  would not require FBI certification. There is no guarantee
                  that the company will be able to raise sufficient funding to
                  complete this project or that it will ever be able to meet FBI
                  certification


DDSI believes that it will not reach profitability until the year 2003. Over the
next twelve months, management is of the opinion that sufficient working capital
will be obtained from operations and external financing to meet the Company's
liabilities and commitments as they become payable. DDSI has in the past
successfully relied on private placements of common stock securities, bank debt,
loans from private investors and the exercise of common stock warrants in order
to sustain operations. If DDSI is unable to obtain additional funding in the
future, it may be forced to curtail or terminate operations. A recent financing
has been obtained and the underlying shares are being registered in this
registration statement (see "Selling Shareholders" and "Recent Financing" on
page 40).


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

         o        Cut costs in areas that add the least value to DDSI.
         o        Derive funds through investigating business alliances with
                  other companies who may wish to license the Compu-Scan device
                  or the FMS SDK (software developers kit).
         o        Increase revenues through the introduction of Compu-Capture,
                  specifically towards kindergarden through twelfth grades, for
                  the creation of ID cards.
         o        Increase revenues through the introduction of a scaled down
                  version of our Compu-Capture product.

Results of Operations
---------------------

Six Months June 30, 2002 Compared to the Six Months Ended June 30, 2001
-----------------------------------------------------------------------

Revenues for the six months ended June 30, 2002 of $414,158 decreased $311,100
or 43% from the six months ended June 30, 2001. DDSI generates its revenues
through software licenses, hardware, post customer support arrangements and
other services. The decrease in DDSI's revenue is attributed to discontinued
sales of the SI-3000 product line at the end of the first quarter in 2001.
SI-3000 products' largest revenue impact was in software sales. These revenues
are included in deferred revenue until the job has been completed and
"signed-off" by the client. Once that job is completed, revenue is then
recognized on the income statement. During the first six months of 2002, DDSI
recognized revenue of $5,307 from software maintenance agreements from previous
installations of SI-3000. Maintenance revenues increased $45,672 or 16.7% from
the six months ended June 30, 2001 primarily due to an increase in DDSI's
customer's service and additional stations being purchased by customers which
include software maintenance agreements.








                                       16
<PAGE>

Cost of goods for the period ended June 30, 2002 was $82,013, a decrease of
$187,775 or 70% from the same period, prior year. The decrease was attributable
to the decrease in SI-3000 projects. Cost of goods sold as a percentage of
revenue for the period ended June 30, 2002 was 20% of total revenues, versus 37%
in the same period a year earlier, a decrease of 17%.

Costs and expenses decreased $644,721 or 47% during the six months ended June
30, 2002 versus the six months ended June 30, 2001. The decrease is due
primarily to the cost containment efforts of the Company. This decrease was
offset by an increase in interest and amortization of deferred debt cost of
$226,635 in connection with the convertible debentures issued in 2001. All other
expenses of the Company experienced decreases with the exception of the
development department that increased $11,281 or 8% for the six months ended
June 30, 2002 versus the six months ended June 30, 2001.

General and Administrative expenses for the six month period ending June 30,
2002 was $510,565 versus $917,244 for the same period prior year for a decrease
of $406,679 or 44%. This decrease was mainly attributable to a decrease in
salaries of $48,112, a prior year charge in miscellaneous of $243,000 for
services paid in stock, a decrease in accounting fees of $64,765, a decrease in
insurance costs of $18,058, and miscellaneous items for $32,744.

Sales and Marketing expenses decreased $249,323 for the six-month period June
30, 2002 from $306,561 or 81%. This decrease was mainly attributable to a
decrease in salaries, commissions, benefits and payroll taxes of $157,273,
travel expenses of $19,621, a decrease in public relations / advertising costs
of $17,334, a reduction in trade show expenses of $4,700, a decrease in hiring
expenses of $36,300, a cost cut in computer expenses of $5,656 and
miscellaneous items for $8,439.

Research and development for the six months ended June 30, 2002 was $151,375
compared to $140,094 for the same period prior year for an increase of $11,281,
which was due to an increase in research and development consulting costs.

The net loss for the Company decreased 31% for the six months ending June 30,
2002 to ($896,520) from ($1,303,638) for the six months ending June 30, 2001.
This was principally due to the decrease in expenses during the period.

Net cash used in operating activities for the six months ended June 30, 2002 and
2001 was $459,197 and $360,113, respectively. The change in cash from operating
activities in the six months ended June 30, 2002 versus 2001 of $99,084 was
principally due to the increase amortization of debt discount and the decrease
in deferred income offset by the decrease in the net loss for the six months and
other changes in operating assets and liabilities ended June 30, 2002.

Net cash provided by (used in) investing activities six months ended June 30,
2002 and 2001 was $4,925 and ($9,433) respectively, reflecting a change of
$14,358. This change is due to lesser purchases of furniture and equipment and
less cash being released from restriction for the six months ended June 30, 2002
as compared to the same period prior year.

Net cash provided by financing activities was $ $61,153 and $ 320,435 for the
six months ended June 30, 2002 and 2001, respectively, reflecting a decrease of
$259,282. This decrease was principally due to a reduction in convertible notes
issued of $280,000, offset by financing costs.








                                       17
<PAGE>

Year Ended December 31, 2001 versus Year Ended December 31, 2000
----------------------------------------------------------------
Revenues for the year ended December 31, 2001 of $1,726,707 decreased by 43%
from 2000. The Company generates its revenues through software licenses,
hardware, post customer support arrangements and other services. The decrease in
the Company's revenue for software and hardware during the period is attributed
to a decrease in the sales of the SI-3000 product, which the Company has ceased
to actively sell. Maintenance revenues decreased $62,512 or 11% from the year
ended December 31, 2000 primarily due to a decrease in the Company's customers
entering into such arrangements and the revenue sharing agreement with Itx on
maintenance of the SI-3000 product line. The original contract dated September
16, 1996 has been included as Exhibit 10.2.2. Since Itx provided the support,
there was a 90/10 revenue split. The 10% payment to DDSI covers the Company's
accounting and administrative efforts. DDSI has an arms length relationship with
Itx and does not have a relationship with any of its officers or directors. DDSI
has an agreement with Itx whereby if one of DDSI's FMS clients contracts for
maintenance, Itx provides the maintenance. Other revenues consist of sales of
supplies that the Company makes available to its customers, such as wristbands,
ID cards and print packs. More customers ordered such items in the year ended
December 31, 2001 versus December 31, 2000, which accounted for the modest
increase. Cost of goods decreased $906,583 or 56% due to the decrease in
revenues and was reduced to 41% of total revenues from 53% in the same period a
year earlier. Both the lower cost of sales and the higher gross margin are
attributed to the decrease in sales of the SI-3000.

Operating Costs and expenses decreased $754,439 or 23% during the year ended
December 31, 2001 versus the year ended December 31, 2000. The decrease is due
primarily to the strict cost containment measures the Company has put in place
and the reorganization of the sales department. Non-operating expenses increased
$413,604 due to the write-off of capitalized software development costs related
to the Compu-Scan device. Other expenses also increased $900,125 due to interest
expense in connection with the convertible debentures issued in 2001 and the
provision for doubtful note receivable of former officer recorded in 2001. The
increase in other expenses of $900,125 for the year ending December 31, 2001
versus the year ending December 2000 was attributable to $530,780 of the
amortization of beneficial conversion costs related to the convertible
debentures, $184,945 in amortization of debt discounts, $177,400 in allowance
for ex-officer loan, and $7,000 in late charges.

General and Administrative for the twelve month period December 31, 2001 was
$1,705,242 versus $1,843,336 for the same period prior year for a decrease of
$138,094 or 7.5%. This decrease was mainly attributable to a decrease in
salaries of $56,110 and a prior year charge in miscellaneous of $84,808 for
services paid in stock.

Sales and Marketing and Research and Development expenses decreased $463,167 for
the twelve-month period December 31, 2001 from $917,381, or 50%. This decrease
was mainly attributable to a decrease in salaries and commissions of $333,337,
travel expenses of $158,259 offset by an increase in public relations of
$35,250.

Research and Development decreased $153,133 for the twelve month period ended
December 31, 2001 or 28.5% for the same period prior year. The decrease was
mainly attributable to a reduction in professional consulting of $145,889 plus a
reduction in travel & entertainment of $9,034.

Other expenses increased $1,313,729 due to the following: 1) a $413,604 charge
due to the write-off of capitalized software development costs related to the
Compu-Scan device, 2) a $580,780 charge for below market beneficial debt
conversion costs, 3) $184,945 in amortization of debt discounts, 3) $7,000 in
late fees, and 4) a $177,400 charge to bad debt.

The net loss for the Company increased 47% for the year ending December 31, 2001
to $2,982,510 from $2,030,052 for the year ending December 31, 2000. This was
principally due to the decrease in revenues for the period.

Net cash used in operating activities for the years ended December 31, 2001 and
2000 was $1,019,331 and $1,334,167, respectively. The change in cash from
operating activities in 2001 versus 2000 of $314,836 was principally due to the
increase in the net loss for the year ended December 31, 2001 versus 2000 of
$952,451 as well as due to amortization of debt discount of $676,486 for the
year ended December 31, 2001, offset by other changes in operating assets and
liabilities.






                                       18
<PAGE>

Net cash provided by (used in) investing activities was $(9,888) and $57,348 for
the years ended December 31, 2001 and 2000, respectively, reflecting a change of
$(67,236). This change is due to lesser purchases of furniture and equipment in
the year ended December 31, 2001, and less cash being released from restriction
in 2001.

Net cash provided by financing activities was $1,262,004 and $1,302,473 for the
years ended December 31, 2001 and 2000, respectively, reflecting a change of
$42,469. This decrease was principally due to only $229,000 in net proceeds
received from the issuance of the Company's common stock in 2001, versus
$1,164,066 received in 2000. The Company received net proceeds of $1,056,000
from the issuance of convertible debentures during the year ended December 31,
2001.

Year Ended December 31, 2000 versus Year Ended December 31, 1999
----------------------------------------------------------------

Revenues for the year ended December 31, 2000, $3,026,458, increased by 6% from
1999. The Company attributes this to the fact that the SI-3000 product line had
an increase in sales and the upgrade to Compu-Capture was completed. The Company
generates its revenues through software licenses, hardware, post customer
support arrangements and other services. The increase in the Company's software
fees during the period is attributed to the continued increase in the sales of
the SI-3000 product. Maintenance revenues increased $44,315 or 8% from the prior
period primarily due to an increase in the Company's customers entering into
such arrangements. Other revenues consist of sales of supplies that the Company
makes available to its customers, such as wristbands, ID cards and print packs.
Fewer customers ordered such items in the year ended December 31, 2000 versus
1999, which accounted for the decrease of $97,878 or 61%. The Company's gross
profit decreased 24% during the year ending December 31, 2000 versus the year
ending December 31, 1999, due to an increase in sales of the SI-3000 product
line which has lower margins. Overall the gross profit percentage per sale
decreased 19%.

Costs and expenses increased $376,455 or 12% during the year ended December 31,
2000 versus the year ended December 31, 1999. This increase is due to an
increase in general and administrative expenses in the amount of $249,490.
Additionally, research and development costs increased in the amount of $106,751
due principally to the continued upgrading of the Company's core software
packages to 32 bit code. Costs of revenues during this period increased as a
result of the corresponding increase in revenues as described above.

The net loss for the Company increased 68% for the year ending December 31, 2000
to $2,030,052 from $1,205,517 for the year ending December 31, 1999. This was
principally due to a lower percentage increase of revenues than the percentage
increase of costs and expenses during the year.

Net cash used in operating activities for the years ended December 31, 2000 and
1999 was $1,334,167 and $866,542, respectively. The change in cash from
operating activities of $467,625 was principally due to the increase in the net
loss for 2000.

Net cash provided by (used in) investing activities was $57,348 and ($699,570)
for the years ended December 31, 2000 and 1999 respectively, reflecting a change
of $756,918. This change was a result of decreased software development costs of
$413,604 in 2000, the purchase of furniture and equipment of $30,325 and
proceeds from the sale of restricted cash of $99,548.

Net cash provided by financing activities was $1,302,473 and $1,664,716 for the
years ended December 31, 2000 and 1999, respectively, reflecting a change of
$362,243. This decrease was principally due to less proceeds received from the
issuance of the Company's common stock in the 2000 year.






                                       19
<PAGE>

Liquidity and Capital Resources
-------------------------------

The Company's revenues have been insufficient to cover the cost of revenues and
operating expenses. Therefore, the Company has been dependent on private
placements of its common stock and issuance of convertible notes in order to
sustain operations. In addition, there can be no assurances that the proceeds
from private or other capital will continue to be available, or that revenues
will increase to meet the Company's cash needs, or that a sufficient amount of
the Company's common stock or other securities can or will be sold or that any
common stock purchase options/warrants will be exercised to fund the operating
needs of the Company.


Over the next twelve months, management is of the opinion that sufficient
working capital will be obtained from operations and external financing to meet
the Company'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. 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 and positive
cash flow:

o      Cut costs in areas that add the least value to DDSI.
o      Derive funds through investigating business alliances with other
       companies who may wish to license the Compu-Scan device or the FMS SDK
       (software developers kit).
o      Increase revenues through the introduction of Compu-Capture, specifically
       towards kindergarden through twelfth grades, for the creation of ID
       cards.
o      Increase revenues through the introduction of a scaled down version of
       our Compu-Capture product.

June 30, 2002

Net cash used in operating activities for the six months ended June 30, 2002 and
2001 was $(459,197) and $(360,113), respectively. The change in cash from
operating activities in 2002 versus 2001 of $99,084 was principally due to the
increases in prepaid, inventory and accrued payroll expenses; decreases in
accounts payable and deferred income.

Net cash provided by (used in) investing activities was $4,925 and $(9,433) for
the six months ended June 30, 2002 and 2001, respectively, reflecting a change
of $14,358. This change is due to no purchase of fixed assets and reducing the
balance of the restricted cash in the six months ended June 30, 2002.

Net cash provided by financing activities was $61,153 and $320,435 for the six
months ended June 30, 2002 and 2001, respectively, reflecting a change of
$259,282. This was principally due to less proceeds received from the issuance
of the Company's common stock in the first six months of 2002 versus the first
six months of 2001.

December 31, 2001 and December 31, 2000

At December 31, 2001, the Company had assets of $1,691,277 compared to
$1,783,044 on December 31, 2000, a decrease of $91,767 and shareholder
deficiency of $(750,124) on December 31, 2001 compared to shareholder equity of
$22,112 on December 31, 2000, a decrease of $772,236. This decrease in
shareholder equity for the year ended December 31, 2001 resulted from the net
loss for the year ended December 31, 2001 of $2,982,510, offset by the issuance
of common stock and the debt discounts related to the issuance of convertible
debentures.





                                       20
<PAGE>

As of December 31, 2001, the Company had a negative working capital of $791,543,
a change of $59,652 from a negative working capital of $731,891 at December 31,
2000, which was primarily a result of an increase in cash, prepaid expenses and
debt discount as well as a decrease in accounts receivable with an overall
increase netting $647,308 and a decrease in accounts payable and accrued
expenses with increases in convertible debentures with the net result of
$689,134. The increase in prepaid expenses is attributable to prepaid SI-3000
costs as of December 31, 2001. The prepaid SI-3000 expenses represent cash
payments for software - $139,095, hardware - $13,422, sub-contractors - $68,140
and software maintenance - $38,178 paid by the Company in advance of and/or
during the installation of the SI-3000 product. The costs remain in prepaid
expenses until there is customer acceptance of the fully installed system, which
is evidenced by the signature of the customer. Once acceptance from the customer
is obtained, prepaid costs and the related deferred income are reduced and
recognized as expense and revenue, respectively. Although the Company stopped
selling the SI-3000 product during the second quarter of 2001, prepaid expenses
related to the SI-3000 increased because installation and customer acceptance of
the SI-3000 can take in excess of two years, and the Company is still in the
process of fulfilling contracts related to customer orders placed prior to the
date the Company stopped selling the SI-3000. The Company has no control over
the time frame as to when the installation and customer acceptance takes place.
This issue is in the hands of Itx as they are the ones to determine installation
dates. Also to be taken into consideration is additional time needed to resolve
any problems that may be encountered by Itx with its installation of the SI-3000
product. As of December 31, 2001, The Company had prepaid expenses of
approximately $260,000 for SI-3000 installation projects which had not yet
commenced or were in progress, compared to $-0- prepaid SI-3000 costs at
December 31, 2000 as similar contracts with these prepayments did not exist at
December 31, 2000. The Company expects to substantially fulfill all SI-3000
orders by Year Ended 2003 at which time the costs and related deferred revenue
will be recognized.

The Company expects that its monthly operating expenses should not exceed
$80,000 per month which it believes it can maintain until such time as
profitability and cash flow are sufficient to cover these monthly expenses.
Until the above can be attained the Company will have to seek additional
funding.

DDSI's monthly operating expenses are about $80,000 per month. Of this $61,000
is covered by operations and $19,000 is covered by outside financing. If unable
to sustain outside financing, DDSI would need $60,000 per month to maintain
operations on a bare bones basis.

Other Events
------------

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

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

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

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

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




                                       21
<PAGE>

Name                  Shares        Project

NIR                   150,000       financial consulting agreement
Anthony Hill           50,000       increase presence in commercial markets
Frank Guthart          25,000       increase recognition of DDSI through
                                    Federal Contracts
Stuart Johnson         30,000       installation and travel schedules
Randolph Hall          85,000       stock payment of sales commission
Scott McBride         200,000       increase sales of CPC Lite to criminal
                                    justice and commercial market
Jim Gilligan          200,000       increase sales of CPC Lite to criminal
                                    justice and commercial market
David Millery          25,000       advice regarding Compu-Capture Enterprise
                                    System
Ken Blessing           25,000       advice regarding Compu-Capture Enterprise
                                    System
Darlene Lazur          41,949       stock payment for company incurred expenses
Ralph Hallenbeck      105,882       SOLVPRO - FMS Contract with Authentic &
                                    Government Sales of FMS
George Rabine         100,000       recognition and contacts of DDSI in the
                                    Asian market
Don Brown             100,000       advice concerning program development for
                                    federal contacts
Steve Randall         400,000       corporate matters Advocacy Group 300,000
                                    government and political matters
About Face            750,000       public relations and investor relations
                                    activities
Owen Nacarrato        123,000       legal services
NIR                   360,000       financial consulting agreement


6. During October through December 2001, DDSI issued common stock via
Subscription Agreements to various individuals. The Subscription Agreements
provided for the purchase of up to 13,333,333 shares of common stock of DDSI at
$0.03 per share, in $10,000.00 (U.S.) blocks, equaling 333,333 shares per block,
for an aggregate total of $400,000. Through January 2002, the company has raised
$240,000 through these agreements and has issued 7,999,996 shares of common
stock.

7. On December 31, 2001, DDSI issued three convertible debentures for an
aggregate amount of $500,000, with simple interest accruing at the annual rate
of 12%. These debentures are due December 31, 2002. Interest payable on the
Debentures shall be paid quarterly commencing March 30, 2002. The holders shall
have the right to convert the principal amount and interest due under the
debentures into shares of DDSI's common stock. The conversion price in effect on
any Conversion Date shall be the lesser of (1) $.043 and (2) 50% of the average
of the lowest three inter-day sales prices of the Common Stock during the twenty
Trading Days immediately preceding the applicable Conversion Date. The shares
that will be issued upon conversion of these debentures are being registered for
resale purposes by this registration statement.


                                  Our Business

DDSI, a Delaware corporation incorporated in 1994, is the successor to
Compu-Color, Inc., an Iowa corporation. The operations of DDSI were started as a
division of ASI Computer Systems, Inc. of Waterloo Iowa in 1986. Compu-Color,
Inc. was formed in July 1989 and as of July 1, 1989 purchased the assets of the
Compu-Color division of ASI Computer Systems, Inc.

DDSI develops, assembles, markets and installs computer systems which capture
video and scanned images, digitize the image, link the digitized images to text
and store the image and text on a computer database which allows for
transmitting the image and text by computer or over telephone transmission lines
to remote locations.

Imaging technology enables computers to record, store and retrieve both textual
information and visual images. The common problem in imaging technology is how
to record, store, process and retrieve information and images within the same
system. DDSI's software programs utilize technology to link the textual
information with the images so that customers can record and retrieve related
text and images. DDSI originally developed the software to address the
information retrieval problems of tax assessors. DDSI subsequently adapted the
software for use by law enforcement agencies and management of jail facilities.
DDSI's software also addresses different information retrieval needs such as
reproducing line ups and producing housing badges (jails), bar coded wristbands
for identification which facilitates movement within jails and courts and
storing and retrieving hand written and computer generated document images
within arrest records.

While the majority of the Company's sales are one time only due to the fact that
they are software based, the Company does offer maintenance and support for
their products. On a historical basis, the company has generated approximately
$550,000 on an annual basis, or $1,650,000 over the past three years from these
services. Service revenue account for an average of 23% of total revenue.






                                       22
<PAGE>

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 insure 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
text information, or as part of a computer generated line-up. The digitized mug
shot and information can be transmitted to remote locations by telephone line or
radio frequency or through computer networks and can be retrieved rapidly from
central and/or remote locations.

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

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

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

Compu-Capture(R) 32

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.





                                       23
<PAGE>

Compu-Capture(R) ActiveX32

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

Compu-Sketch

The Compu-Sketch 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.

New Products

Identify On Demand System:

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

FMS  ("Fingerprint Matching System")

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

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

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





                                       24
<PAGE>

To date two FMS sales have occurred. The first referenced FMS sale was to Bucks
County, Pennsylvania; for approximately $45,000. The second referenced FMS sale
was to Wake County, NC for $23,910, which took place in December 2001.

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

Compu-Scan 3000

The Compu-Scan is a non-contact inkless direct reader fingerprint system. During
1998, The Company entered into in a development contract with ISC/US (Fort
Lauderdale, FL and Hamburg, Germany), an engineering firm having a specialized
background in fingerprint technology, to develop a computerized inkless,
non-contact fingerprint capture device called the Compu-Scan 3000. Under this
agreement, the Company granted ISC/US the funds (non reimbursable) to develop
the Compu-Scan 3000 based on certain specification requirements provided by
DDSI. The development process of the Compu-Scan 3000 will not be deemed complete
until FBI certification is achieved. In return, the Company received worldwide
rights to sell this product without a royalty fee. There are two parts to the
Compu-Scan unit; one is the single finger roll unit, which includes the "rolled"
fingerprints of the individual fingers and the other is a slap unit, which
captures the four fingers simultaneously from each hand and then the two thumbs.

The Compu-Scan electronically reads and creates a digital image of a
fingerprint. Contact inkless fingerprint capture devices typically record
fingerprint images by rolling (contacting) the fingers of a subject on the
surface of an optical assembly, creating an optical image of the fingerprint,
and then converts the optical image into a digital image by a photo-imaging
detector. The Compu-Scan operates in a similar manner, but without direct
contact by the finger to the device. The Compu-Scan captures the fingerprint by
placing the finger over an opening in the Compu-Scan which projects a light onto
the suspended finger upon which a camera captures the resulting reflected
fingerprint image.

Under federal regulation, law enforcement agencies in the United States may only
utilize fingerprint systems that have passed an extensive FBI certification
process. As a result any inkless fingerprint system developed by DDSI must pass
the FBI certification process before it can be distributed to law enforcement
agencies in the United States. The FBI Appendix F requirements are quite
voluminous and detailed; however they are available at the FBI Web Site
(http://www.fbi.gov/hq/cjisd/iafis/efts70/cover.htm). DDSI however, can supply
an inkless non-contact fingerprint system prior to FBI certification for
commercial business use, for example, for ATM machines, biometric identification
for universities, libraries, access control and any such commercial application,
which does not require a rolled fingerprint match.

On July 25, 2000, DDSI entered into an agreement with DBA Systems, a division of
Titan Systems Corp., for technical assistance in achieving compliance with the
FBI certification process. DDSI has no other relationship with Titan or its
officers and directors. The agreement calls for DDSI to pay DBA Systems for work
done towards achieving certification of the Compu-scan based on phases of
completion. If DBA reaches certification of the Compu-Scan, DDSI would be
obligated to pay approximately $460,000 to $600,000 for DBA's expenses. However,
if Certification is not achieved or if DDSI decides not to pursue the Compu-scan
project, DDSI would be obligated to pay DBA systems $58,000.

After discussions with Titan and other parties, it was recommended that DDSI
replace the system lens and possibly recast the structure of the single finger
roll unit to fit the new lens in order to meet FBI certification requirements.
Upgrading, testing and redesigning the Compu-Scan to meet FBI requirements could
take an additional 12 to 18 months, and will require additional funding of at
least $400,000. DDSI may not be able to raise sufficient funding to complete the
project which will result in either a delay or termination of the project.






                                       25
<PAGE>

The FBI has recently made available an acceptable palm print capture image. With
the possibility of enhancing the Compu-Scan slap unit (as discussed above), and
with the FBI rejecting DDSI's latest submission, DDSI put a temporary hold on
modifying its present Compu-Scan system. Given the ability to secure funding,
DDSI will continue its researching of what it would take to enhance its present
system to be able to scan both a fingerprint and/or a palm print plus meet FBI
Appendix F requirements, but for now this research is on hold.

It is estimated that this additional research will require approximately
$200,000 in funding to complete.
If the research information results are favorable, DDSI will redesign the unit
for FBI certification and commercial production. If the research is
unsuccessful, DDSI will revaluate at that time whether to go forward on this
project.

During December 2001, DDSI revised its anticipated certification date for its
Compu-Scan product indefinitely after its submission was not accepted by the
FBI. Additionally, there are no assurances that the FBI will ever certify the
technology. As such, and since DDSI is unable to forecast any revenues from the
product, DDSI has written off the remaining investment in Software Development
of $298,714 in the fourth quarter of 2001.

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 three (3) full-time employees in sales, marketing or sales
management. Leads are generated by DDSI's marketing department 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 application.

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
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 17% of the installed software license fee.

The Company 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.





                                       26
<PAGE>

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

Greater Penetration of Existing Customers

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

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

Seek Acquisitions and Alliances

Depending on the availability of funds, DDSI intends to continue developing
software interfaces to make its products compatible with new and expanded
versions of systems offered by strategic alliances and other vendors of criminal
justice software. DDSI believes that expanding the number of law enforcement
systems with which the Compu-Capture(R) systems are compatible will assist DDSI
in maintaining its competitiveness.

Sales by Geographic Area

During the fiscal years ended December 31, 2001, 2000, and 1999, 89%, 93%, and
95%, respectively, of DDSI's revenues have been from domestic customers. Foreign
sales for 2001, 2000, and 1999 were $70,856, $205,953 and $150,209, or an
aggregate for these years of approximately $362,266.

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-Scan 3000 if certified, will have two main competitors, CrossMatch and
Identix Incorporated. All these competitors market inkless computerized
fingerprint capture systems on a national basis, and each competitor has
received FBI certification. There are no guarantees that the Company will be
able to successfully compete against these existing products.

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

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

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





                                       27
<PAGE>

Suppliers

DDSI's hardware are 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 by a wide range of
manufacturers. As a result DDSI is not dependent on any particular supplier or
raw material.

Government Regulation or Government Approval

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

The FBI has developed an extensive certifying process that an inkless
fingerprint system must pass before the FBI will accept cards produced by that
system. ISC/US, has agreed to grant DDSI the right to distribute an inkless
fingerprint system that has not been certified by the FBI. While there is no
assurance that the Compu-Scan inkless fingerprint system will successfully
complete the FBI certification process, the system produces fingerprint cards
similar in quality and type to other fingerprint systems that have been approved
by the FBI. DDSI believes that its Compu-Scan 3000 inkless fingerprint system
will meet the requirements of the FBI certification process, assuming it can
obtain the necessary funding to eventually complete development of the product.

ISC/US is a Delaware Corporation located in Ft. Lauderdale, Florida, and is not
related to any government agency. ISC/US also has development offices in
Hamburg, Germany.

Research and Development


As mentioned above (see page 26), DDSI has put a temporary hold on modifying its
present Compu-Scan system and started research on what it would take to upgrade
the present system to be able to scan both fingerprints and a palm print with
the slap unit, plus meeting FBI image requirements. This research should be
completed by September/October 2002. Titan Corporation is assisting DDSI in this
research.


The Company spent $536,350 in 2000 and $383,217 in 2001 for a total of $919,567
on pure research and development in the last two years. This amount includes
$388,591 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-Scan
product and FMS (Fingerprint Matching System) software.

Patents, Trademarks and Licenses

DDSI has one patent application, number 09/08/800, for a "Device and Method for
Scanning and Mapping a Surface", which was filed in October 1998. The
application is on hold until the product is completed. In addition there is a
possibility that this project may not be completed (see Compu-Scan risk factor).
The primary use of the device is a contactless fingerprinting system.

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





                                       28
<PAGE>

Details of these trademarks are listed below:

Compu-Capture - registered June 1, 1993 as No. 1,774,106 (renewal due 6/1/2003)

Compu-Color - registered August 22, 1989 as No. 1,552,560 (renewed in 1999 with
next renewal due on 8/22/2009)

Compu-Sketch - registered April 28, 1998 as No. 2,153,713 (Combined Declaration
Under 8 & 15 due 4/28/2004)

Compu-QuickSketch - registered April 28, 1998 as No. 2,153,714 (Combined
Declaration Under 8 & 15 due 4/28/2004)

CPC2000 - registered January 14, 1997 as No. 2,029,964 (Combined Declaration
under 8 & 15 due 1/14/2003)

DDSI - registered September 9, 1997 as No. 2,094,821 (Combined Declaration under
8 & 15 due 9/9/2003)

Digital Descriptor Systems, Inc. - registered September 16, 1997 as No.
2,098,473 (Declaration Under Section 8 due 9/16/2003)

Important Events

The Company filed a Form 8-K on July 29, 2002 announcing the resignation of
Garrett U. Cohn from the Board of Directors effective July 23, 2002 for personal
reasons.

On March 18, 2002 and March 11, 2002, DDSI announced an array of upgrades,
additional licenses and the addition of new customers which included the
successful installation of a multi-user solution in Illinois (this sale totaled
$12,000 and was completed in March 2002), five additional workstations and an ID
badging module to a Mississippi agency (this sale totaled $7,183 and was
completed in March 2002), one of New Jersey's largest county's Prosecutor's
office (this sale totaled $1,170 and was completed in September 2001).

On March 4, 2002, the Company announced the sale of an ID Badging System to one
of its existing customers. The ID Badging System will be used to accurately
identify all city employees including but not limited to Policeman, Fireman,
Security Guards, Crossing Guards, etc.

On February 22, 2002, DDSI announced the sale of a new countywide solution sold
in California. This sale will encompass 4 separate processing stations around
the county that will be integrated with the countywide CAD (Computer Assisted
Design) and RMS (Record Management System) systems. This sale totaled $36,077
and was completed in February 2002.

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

On January 23, 2002 DDSI announced the appointment of Anthony Shupin, Vincent
Moreno, Michael J. Pellegrino and the reappointment Robert Gowell to the
Company's Board of Directors. These appointments were made to fill the vacancies
resulting from the resignations of Charles Saphos, John Boyle, Robert Gowell and
Robert Martin. The Company also announced the resignation of Ms. Myrna
Marks-Cohn, Ph.D, from the Board of Directors for personal reasons.

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





                                       29
<PAGE>

On December 5, 2001, DDSI announced the formation of a new advisory board. The
focus of the new board will be to assist and advise management of the company in
all areas of its business.

On November 26, 2001, the Company announced the completion of recently awarded
purchase orders to integrate solutions in Haverhill and Stoneham, Massachusetts.
The contracts totaled $52,000 and provide over $2,000 annually in maintenance
fees.

On November 15, 2001, DDSI announced the first non-criminal justice market sale
of its new Fingerprint Matching System (FMS), which was acquired by a county's
Department of Health and Human Services (HHS) for the purposes of identifying
and tracking its homeless population.

On November 2, 2001, the Company announced the signing of a development contract
for the Compu-Capture Enterprise Suite (CCES), with Pennsylvania-based IT
developer, ImageVision.Net (IMV). This contract was cancelled on January 14,
2002 due to lack of funding.

On October 29, 2001, DDSI announced the availability of its new "Identify On
Demand" secure ID product, an ID System for the commercial market. This product
was developed by integrating FMS' core technology with the Compu-Capture(R) core
technology.

On October 11, 2001 the Company announced the first FMS sale for Bucks County,
PA and the Bucks County Correctional facility in Doylestown, PA. This marks the
first installation in the criminal justice market of DDSI's new Fingerprint
Matching Solution (FMS) and is scheduled for installation by the end of next
quarter.

On September 25, 2001, DDSI announced an agreement with Mr. Rudy Hallenbeck,
President of SOLVPRO Inc., a privately held high tech consulting firm, to
leverage DDSI products and technology into major contracts. The Company believes
SOLVPRO will bring to DDSI essential big project capability and partnering
knowledge which will complement DDSI's proprietary products and solutions.

On September 19, 2001, the Company announced the availability of its Fingerprint
Matching System, the only fully scalable fingerprint identification system in
the world designed to take full advantage of the Windows NT/2000 environment.

On September 18, 2001, DDSI announced that the Company received its first
purchase order for its livescan fingerprint capture device. This initial order
is scheduled to be delivered in early 2002.

Employees

DDSI employs a total of 8 full time employees and 1 part time employees.

Management

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

As indicated earlier, the Board of Directors approved a major management
restructuring on January 25, 2002. On January 25, 2002, Mr. Cohn resigned as CEO
and President to help resolve differences between Mr. Martin and the Company.
Mr. Robert Gowell was appointed as CEO and Co-Chairman of the Board of
Directors. Mr. Michael J. Pellegrino will serve as President and Chief Operating
Officer of the Company in addition to his current position as CFO. Mr. Randolph
Hall was appointed as Vice President of Sales.

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






                                       30
<PAGE>

Mr. Gowell's ten-year law enforcement background can provide knowledge and
guidance in how to deal with law enforcement agencies in pursuing sales.

Mr. Pellegrino brings over seven years of operation and financial experience
with DDSI into the Board of Directors.

Mr. Moreno's over thirty years of experience in the software industry can
provide knowledge and guidance in how DDSI should proceed in growing the
business.

Mr. Shupin's background in business development will be extremely helpful as we
continue to enter new markets.

The Company's current officers and directors consist of the following persons:
<TABLE>
<CAPTION>
Name                       Age      Position with Company
----                       ---      ---------------------
<S>                        <C>      <C>
Robert Gowell              34       Co-Chairman, Chief Executive Officer and Director
Michael Pellegrino         53       President, Chief Operating Officer and Chief Financial Officer
Anthony Shupin             47       Director
Vincent Moreno             59       Director
Randolph W. Hall           43       Vice President
</TABLE>
Robert Gowell was appointed Co-Chairman and Chief Executive Officer on January
25, 2002. He is a retired Deputy U.S. Marshal who has worked out of the New York
and Pennsylvania offices from 1991-2001 (10 years). He earned his B.S. in
Management and Finance from the City University of New York. He is currently
working on his MBA at Kutztown University.

Michael Pellegrino joined the Company in 1995. On January 25, 2002 he was
appointed President, Chief Operating Officer and Chief Financial Officer,
Secretary and a Director of the Company. For eleven years prior (from 1984 to
1995), Mr. Pellegrino was Vice President and CFO of Software Shop Systems, Inc.
From 1979 to 1984 (5 years), he was a regional controller for Capital
Cities/ABS, and for seven years earlier (1972-1979) as Director of Financial
Systems for ADP. Mr. Pellegrino has a Bachelors degree in accounting from MSU
and a Masters in Finance from Rutgers University, after which he worked at
Touche Ross for 3 years.

Garrett U. Cohn resigned as Co-Chairman and Director of the Board of Directors
effective July 23, 2002 for personal reasons. He had been a Director of the
Company since July 1994. Prior to the change in management that took place
effective January 25, 2002, Mr. Cohn served as President and Chief Executive
Officer (for 12 years). Garrett Cohn graduated from the University of Iowa, Iowa
City, Iowa in 1961. His degrees were in Philosophy with a minor in Business. He
went into in the merchandise promotion business with International Merchandise
Company from 1978 - 1984 (6 years) and designed many national programs for
Playboy, Shell Oil Company, Standard Oil Company, American Express, Polaroid
Corporation, Fingerhut Manufacturing and many other clients. He was awarded
national recognition by developing the largest selling single piece of
promotional luggage during the years 1983 to 1986 and was featured in Money
Magazine. Following his successful direct merchandising activities, he became
President of Rockford Tool Company (from 1984-1986), Hillside, Illinois which he
rescued from bankruptcy and later sold to an investment group. He then returned
to his family's business and developed the computer imaging ability into a
national video imaging division of ASI Computers called Compu-Color Inc. In
1995, a public Company named Digital Descriptors Systems Inc. was formed.






                                       31
<PAGE>

Anthony Shupin's 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. As a
Business Development Executive in the Communications and Media practice at
Deloitte Consulting from 9/2000 to 9/2001, Mr. Shupin directed activities and
resources targeted at strategic global accounts. Prior to Deloitte, he served as
Vice President of John Richard Associates, Inc. a management consulting firm
specialized in telecommunications from 7/1999 to 9/2000. His background also
includes roles as Director of International Business Development at Space
Imaging for 10 years (from 1989 to 1999), L.P. where responsibilities included
supervising the International Groundstation Network and establishing global
strategic relationships concerning the acquisition and distribution of high
resolution satellite imagery. Mr. Shupin has also served as Vice President,
Sales and Marketing at Remark Industries, Inc. from 1986 to 1989 (3 years),
which marketed and manufactured products such as on-line lottery and electronic
gaming devices, medical monitoring and analysis devices. Prior to Remark
Industries, he held management and account management positions at Wang
Laboratories from 1981 to 1986 (5 years) and Xerox Corporation in Princeton, New
Jersey from 1978 to 1981 (3 years). 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. He has been an
invited speaker at various international symposiums and has published articles
regarding market analysis and access, education and technical assessment.

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

Randolph W. Hall joined the Company as the Director of Marketing in 1996 and in
1999 assumed the position of Vice President of Operations for 3 years (until
2002). Mr. Hall was appointed Vice President of Sales on January 25, 2002. Prior
to joining the Company (from 1990-1995), Mr. Hall successfully launched and
subsequently sold his ownership share of a Company that marketed a records
management system for local law enforcement agencies. Before that Mr. Hall
served as the Regional Installation and Training Manager from 1981 - 1989 (8
years),for a national solution provider of law enforcement systems. Mr. Hall has
a degree in Computer Science and is currently pursuing his Bachelors in Business
Administration from Ursinus College.

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

         o        Mr. Ott resigned from the DDSI Board on February 26, 2001 for
                  personal reasons. He resigned as Vice President of Sales on
                  March 30, 2001.

         o        Mr. Charles Saphos resigned from the Board on July 26, 2001
                  due to the fact the Company could not provide Directors &
                  Officers insurance

         o        Mr. Boyle resigned as a Board Member on December 18, 2001 for
                  personal reasons.

         o        Mr. Gowell resigned as a Board Member on December 18, 2001 for
                  personal reasons. Mr. Gowell was later reappointed as
                  Co-Chairman of the Board, having changed his mind as a result
                  of the addition of other outside Board members.

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






                                       32
<PAGE>

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

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

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

Executive compensation

The following table summarizes the compensation earned and paid by the Company
to each Officer and to all Executive Officers as a group for services rendered
in all capacities during the year ended December 31, 2001:
<TABLE>
<CAPTION>
                                         Summary Compensation Table
                                                                         Long Term Compensation
                  Annual Compensation                         Awards                Payouts
 (a)               (b)     (c)         (d)    (e)           (f)           (g)         (h)          (I)
Name                                         Other                      Securities               All
and                                          Annual       Restricted    Underlying               Other
Principal                                    Compen-      Stock         Options/      LTIP       Compen-
Position Year              Salary     Bonus  sation($)    Award($)      Sar (#)     Payouts($)   sation ($)
<S>               <C>   <C>           <C>    <C>          <C>           <C>         <C>          <C>
Garrett Cohn*
President/CEO     1999  $160,000        0      0           0              0            0            0
                  2000  $160,000        0      0           0              0            0            0
                  2001  $160,000        0      0           0              0            0            0
Michael J.        1999  $109,000        0      0           0              0            0            0
  Pellegrino      2000  $110,000        0      0           0              0            0            0
President & COO   2001  $110,000        0      0           0              0            0            0
Michael Ott**     1999  $110,000        0      0           0              0            0            0
V.P/ Director     2000  $110,000        0      0           0              0            0            0
                  2001  $110,000        0      0           0              0            0            0
 Randy Hall       1999  $ 70,000        0      0           0              0            0            0
    V/P           2000  $ 73,500        0      0           0              0            0            0
                  2001  $ 73,500        0      0           0              0            0            0
</TABLE>
*Mr. Cohn resigned as President and Chief Executive Officer effective January
25, 2002. He resigned as Co-Chairman and Director of the Board of Directors
effective July 23, 2002 for personal reasons.
**Mr. Ott resigned from the Company effective March 30, 2001







                                                     33
<PAGE>




Options/Sar Grants in Last Fiscal Year
<TABLE>
<CAPTION>
                                   Number of               % of Total
                                   Securities             Options/SARS
                                   Underlying             Granted to
                                   Options/SARS           Employees in        Exercise or Base

Name                               Granted                 Fiscal Year          Price ($/Sh)        Expiration Date
<S>                                <C>                     <C>                  <C>                 <C>
Garrett U. Cohn, CEO                  0                       N/A                  N/A                       N/A
Michael J. Pellegrino, CFO            0                       N/A                  N/A                       N/A
Randy Hall, VP Operations             0                       N/A                  N/A                       N/A

Aggregated Option/Sar Exercises
         None exercised
</TABLE>

                              Employment Agreements

Garrett Cohn resigned as Co-Chairman and Director of the Board of Directors
effective July 23, 2002 for personal reasons. He resigned as President and Chief
Executive Officer effective January 25, 2002. In July, 1994 the Company entered
into a 5 year employment agreement with Mr. Cohn which entitled him to a base
salary of $150,000 per year which may at the Board of Directors discretion
adjust his base salary (but not below $150,000 per year) or grant a bonus.
Though past the five-year period, the present employment agreement is to remain
in affect until July 18, 2002. In the interim, Mr. Cohn was granted an increase
in his annual base salary of $10,000, making his new base salary $160,000. The
Company shall also furnish Mr. Cohn with an automobile and automobile expenses.
In addition, Mr. Cohn has received non accountable expense allowances of
$11,000, $49,713 and $81,450 in 2000, 1999 and 1998 respectively.

Michael J. Pellegrino, President, Chief Operating Office and Chief Financial
Officer. In March, 2002, the Company entered into a two-year employment
agreement with Mr. Pellegrino (see Exhibit 6.9.3), which entitled him to a base
salary of $115,000 per year which may at the Board of Directors discretion
adjust his base salary (but not below $115,000 per year). Mr. Pellegrino is also
entitled to participate in the Annual Management Bonus Plan. As a participant in
the Annual Management Bonus Plan, Mr. Pellegrino will be eligible to receive
bonuses, based on performance, in any amount from 0% to 100% of the Base Salary.
In addition, Mr. Pellegrino shall participate in the Management Equity Incentive
Plan. As a participant in the Management Equity Incentive Plan, Mr. Pellegrino
will be eligible to receive options, which vest over a period of time from the
date of the option's issue, to purchase common shares of the Company. The
Company shall grant to Mr. Pellegrino, within ninety days of the date of the
Agreement, options to purchase such number of common shares of the Company equal
to 1% of the number of common shares of the Company outstanding on the date of
the Agreement (subject to the vesting and the satisfaction of the other terms
and conditions of such options). The Company may also grant to the Employee,
following the first anniversary of the date of the Agreement and at the sole
discretion of the Board of Directors, options to purchase such number of common
shares of the Company equal to 0.25% of the number of common shares of the
Company outstanding on the date of the Agreement (subject to the vesting and the
satisfaction of the other terms and conditions of such options). The Company
shall also furnish Mr. Pellegrino with an automobile and automobile expenses.
Mr. Pellegrino was appointed as President and Chief Operating Officer effective
January 25, 2002.

Michael Ott**, Vice President of Sales and Director. In July, 1998, the Company
entered into a two-year employment agreement with Mr. Ott, which entitled him to
a base salary of $110,000 per year which may at the Board of Directors
discretion adjust his base salary (but not below $110,000 per year). Though past
the two-year period, this employment agreement is to remain in affect until a
new employment agreement is drafted. Mr. Ott is also entitled to participate in
the Annual Management Bonus Plan. As a participant in the Annual Management
Bonus Plan, Mr. Ott will be eligible to receive bonuses, based on performance,
in any amount from 0% to 100% of the Base Salary. In addition, Mr. Ott shall
participate in the Management Equity Incentive Plan. As a participant in the
Management Equity Incentive Plan, Mr. Ott 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 the Company. The Company shall grant to Mr. Ott,
within ninety days of the date of the Agreement, options to purchase such number
of common shares of the Company equal to 1% of the number of common shares of
the Company outstanding on the date of the Agreement (subject to the vesting and
the satisfaction of the other terms and conditions of such options). The Company
may also grant to the Employee, following the first anniversary of the date of
the Agreement and at the sole discretion of the Board of Directors, options to
purchase such number of common shares of the Company equal to 0.25% of the
number of common shares of the Company outstanding on the date of the Agreement
(subject to the vesting and the satisfaction of the other terms and conditions
of such options).
**Mr. Ott resigned from the Company effective March 30, 2001





                                       34
<PAGE>

Randolph Hall, Vice President Sales. In March, 2002, the Company entered into a
two year employment agreement with Mr. Hall (see Exhibit 6.9.4), which entitled
him to a base salary of $73,500 per year which may at the Board of Directors
discretion adjust his base salary (but not below $73,500 per year). Mr. Hall is
also entitled to participate in the Annual Management Bonus Plan. As a
participant in the Annual Management Bonus Plan, Mr. Hall will be eligible to
receive bonuses, based on performance, in any amount from 0% to 100% of the Base
Salary. In addition, Mr. Hall shall participate in the Management Equity
Incentive Plan. As a participant in the Management Equity Incentive Plan, Mr.
Hall 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 the Company. The
Company shall grant to Mr. Hall, within ninety days of the date of the
Agreement, options to purchase such number of common shares of the Company equal
to 1% of the number of common shares of the Company outstanding on the date of
the Agreement (subject to the vesting and the satisfaction of the other terms
and conditions of such options). The Company may also grant to the Employee,
following the first anniversary of the date of the Agreement and at the sole
discretion of the Board of Directors, options to purchase such number of common
shares of the Company equal to 0.25% of the number of common shares of the
Company outstanding on the date of the Agreement (subject to the vesting and the
satisfaction of the other terms and conditions of such options). The Company
shall also furnish Mr. Hall with an automobile and automobile expenses.
Mr. Hall was appointed as Vice President of Sales effective January 25, 2002.

                    Employee and Director Stock Option Plans

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

The Directors who are employees of the Company receive no compensation for their
services as Directors, either on an annual basis or for each meeting. Directors
are reimbursed for travel expenses they may incur in attending meetings of the
Board of Directors. Directors who are not an employee of the Company, receive
$1,000 for each Board of Directors meeting attended.






                                       35
<PAGE>

                 Certain Relationships and Related Transactions

During May 1996, the Company loaned Mr. Cohn $125,000. Interest is accrued on
this amount at one point over prime and was payable together with the principal
on August 13, 1999. Accrued interest on this loan was $40,525 at December 31,
2000. Subsequently, the Company's Board of Directors agreed to extend the
maturity date of this note indefinitely. On February 22, 2002 Mr. Cohn made a
payment of $23,615.39. In 2001, due to uncertainty as to whether the Company
will collect the note, a reserve for uncollectible notes was recorded in the
amount of $177,400.

The Company's Audit Committee will review any future transactions with
affiliates and make its recommendation to the Board of Directors to ensure such
transactions are at arms length.

The Company's Board will follow the advice of the Audit Committee on
transactions that could have the potential appearance of not being at arms
length transaction.

         Security Ownership of Certain Beneficial Owners and Management

The following table sets forth current information relating to the beneficial
ownership of the Common Stock of the Company by (i) each person owning
beneficially more than 5 percent of the outstanding shares of Common Stock, (ii)
each Director of the Company and (iii) all Executive Officers and directors of
the Company as a group: Percentage of beneficial ownership is based upon
58,156,490 shares of common stock outstanding at October 4, 2002.

                           Beneficial Ownership
Name and Address           of Common Stock
Of Beneficial Owner        No. of Shares
-------------------        --------------------
Garrett U. Cohn
249 Willow Parkway
Buffalo Grove, IL 60089        1,695,000(1)      3.0%

Michael Pellegrino
33 Maple Lane
Brielle, NJ 08730                335,000         0.6%

Michael Ott
26415 212th Avenue
Delhi, IA 52223                  215,000(2)     0.04%

Randolph Hall
505 Northridge Rd.
Collegeville, PA 19426           398,000        0.07%

Robert P. Martin
521-5th Avenue W., #1104
Seattle, WA  98119             3,099,000(3)      5.3%


Robert Gowell
264 Susquehanna Trail
Allentown, PA  18104              96,300        0.02%

Myrna Cohn Ph.D.
249 Willow Parkway
Buffalo Grove, IL  60089          15,000(4)    0.006%

Norman Cohn
200 Pine Tree Road
Radnor, PA 19087                 840,000         1.4%

All Officers & Directors
As a Group                     6,693,300(5)      12.0%






                                       36
<PAGE>
---------------
(1) Garrett U. Cohn owns 60,000 shares of stock. In addition, Mr. Cohn has the
right to vote 840,000 shares of stock held of record by Norman Cohn pursuant to
a Voting Trust Agreement described below, and, as a result of such voting
rights, such shares are included in the shares shown as beneficially owned by
Garrett U. Cohn. He resigned as Co-Chairman and Director of the Board of
Directors effective July 23, 2002 for personal reasons.

(2) Michael Ott Resigned as a Director on February 26, 2001.

(3) Mr. Martin holds 2,399,000 in direct holdings and 700,000 in indirect
holdings. Mr. Martin resigned from the Board of Directors on January 3, 2002.

(4) Myrna Cohn resigned from the Board as of January 14, 2002.

(5) Of the total Officers and Director's shares, 53,000 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). Also included is a ten-year option
for 15,000 shares that vest over four years at a strike price of three dollars
and eighty-one cents ($3.81). Additionally, there are 110,000 options which are
10 year options that vest over 4 years a strike price of $3.30. The remaining
1,480,000 options are 10 year options that are fully vested at varying strike
prices.

(6) Includes all options which are exercisable within the next sixty (60) days.

Under the terms of the Voting Trust Agreement dated May 1, 1995, between Norman
Cohn and Garrett U. Cohn, as Trustee, Norman Cohn has transferred to the trust
840,000 shares of Common Stock of the Company, representing all of the shares of
Common Stock owned by him. Under the terms of the Voting Trust Agreement,
Garrett U. Cohn, as the Trustee, has the right to vote the stock in the Voting
Trust, except as to certain actions, including, but not limited to, any
amendment to the certification of incorporation of the Company, merger or sale
of substantially all of the assets of the Company or any action which will cause
a dilution in the outstanding shares of Common Stock. The term of the Voting
Trust is 10 years and shall terminate in April 2005.

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

                            Description of Securities
General
-------

As of the date of this registration statement, the Company has authorized of
150,000,000 shares of Common Stock at $.001 par value, of which 58,156,490
shares are issued and outstanding at October 4, 2002, plus 1,000,000
authorized shares of $.01 par value per share Preferred Stock and no preferred
shares are issued and outstanding at July 31, 2002. The Company has authorized
outstanding Class A and Class B Warrants numbering one million four hundred
eighty-three thousand and seven hundred fifty (1,483,750) of each class. The
Class A Warrants have an exercise price of $1.00 per share and expire on August
15, 2002. The Class B Warrants have an exercise price of $1.50 per share and
expire on August 15, 2002. The Company has reserved an equal amount of shares
against these warrants.






                                       37
<PAGE>

The following is a description of the securities of DDSI taken from provisions
of our Company's Articles of Incorporation and By-laws, each as amended. The
following description is a summary and is qualified in its entirety by the above
referenced provisions of the Articles of Incorporation and By-laws as currently
in effect. The following description includes all material provisions of the
applicable sections of the underlying documents in the summary.

Each holder of Common Stock is entitled to receive ratable dividends, if any, as
may be declared by the Board of Directors out of funds legally available for the
payment of dividends. As of the date of this Offering Circular, the Company has
not paid any dividends on its Common Stock, and none are contemplated in the
foreseeable future. It is anticipated any earnings that may be generated from
operations of the Company will be used to finance the growth of the Company.

Holders of Common Stock are entitled to one vote for each share held of record.
There are no cumulative voting rights in the election of directors. Thus the
holders of more than 50% of the outstanding shares of Common Stock can elect all
of the directors of the Company if they choose to do so. No one shareholder
beneficially owns more than 50% of the Company's Common Stock.

The holders of Common Stock will have no preemptive, subscription, conversion or
redemption rights. Upon liquidation, dissolution or winding-up of the Company,
the holders of the Common Stock are entitled to receive pro rata the assets of
the Company.

Redeemable Class A Warrants and Redeemable Class B Warrants
-----------------------------------------------------------

The outstanding shares of 58,156,490 as of October 4, 2002 excludes the
authorized and unissued Common Redeemable Class A and Class B Warrants numbering
one million four hundred eighty-three thousand and seven hundred fifty
(1,483,750) of each class. These warrants are publicly traded with the price
generally holding steady at $.02 per warrant.

Redeemable Class A Warrants
---------------------------

Each Class A Warrant entitles the holder to purchase one share of Common Stock
for a period of four years commencing August 15, 1996, subject to earlier
redemption, and will be exercisable at a price of $1.00 a unit. During July 2000
the Class A Warrants' expiration date was extended to August 15, 2002. No
further action was taken and the Class A warrants expired on August 15, 2002.
The Class A Warrants are subject to redemption by the Company at any time on not
less then 30 days written notice, at a price of $0.10 per Warrant, provided that
the per share closing bid price of the Common Stock exceeds 175% of the exercise
price for at least 20 consecutive trading days. For these purposes, the closing
bid price of the Common Stock shall be determined by the closing bid price as
reported by NASDAQ so long as the Common Stock is quoted on NASDAQ and if the
Common Stock is listed on a national securities exchange, shall be determined by
the last reported sale price on the primary exchange on which the Common Stock
is traded. Holders of Class A Warrants will automatically forfeit all rights
hereunder except the right to receive the $0.10 redemption per Warrant unless
the Warrants are exercised before they are redeemed.

Redeemable Class B Warrants
---------------------------

Each Class B Warrant entitles the holder to purchase one share of Common Stock
for a period of four years commencing August 15, 1996, subject to earlier
redemption, and will be exercisable at a price of $1.50 a unit. During July
2000, the Class B Warrants' expiration date was extended to August 15, 2002. No
further action was taken and the Class B warrants expired on August 15, 2002 The
Class B Warrants are subject to redemption by the Company at any time on not
less then 30 days written notice, at a price of $0.10 per Warrant, provided that
the per share closing bid price of the Common Stock exceeds 200% of the exercise
price for at least 20 consecutive trading days. For these purposes, the closing
bid price of the Common Stock shall be determined by the closing bid price as
reported by NASDAQ so long as the Common Stock is quoted on NASDAQ and if the
Common Stock is listed on a national securities exchange, shall be determined by
the last reported sale price on the primary exchange on which the Common Stock
is traded. Holders of Class A Warrants will automatically forfeit all rights
hereunder except the right to receive the $0.10 redemption per Warrant unless
the Warrants are exercised before they are redeemed.





                                       38
<PAGE>

The holders of Warrants ("Warrant holders") are not entitled to vote, receive
dividends, or exercise any of the rights of holders of shares of Common Stock
for any purpose. In addition, the Company has a right to increase the Warrant
Exercise Price upon not less than 20 days' prior notice to the Warrant holders
if the Company extends the exercise period of the Warrants beyond the four year
period.

Change in Control
-----------------

There are not provisions in the Articles of Incorporation or Bylaws that would
delay, defer or prevent a change in control of Digital Descriptor Systems, Inc.

Penny Stock Disclosure Requirements:
-----------------------------------

See discussion in risk factor section, page 11, with the heading "Penny Stock
issues may be difficult for an investor to dispose of."

Shares Eligible for Future Sale

On the date of this offering, DDSI has 58,156,490 shares of Common Stock
outstanding. Sales of a substantial number of shares of DDSI's Common Stock in
the public market following this offering could adversely affect the market
price of the Common Stock. DDSI is registering with this document 62,184,841
shares of Common Stock for resale (of which 10,253,207 have been previously
issued as restricted stock), all of which will be freely tradable without
restriction or further registration under the Securities Act. This includes:

         o        50,000,000 shares representing the conversion of the aggregate
                  of $500,000 of 12% debentures at a price of $.02 per share
                  (includes 25,000,000 reserve shares).
         o        1,820,634 shares representing the conversion of a $25,000
                  debentures at 10 percent interest and 111,000 warrants at a
                  price of $.015 per share.
         o        10,253,207 shares of other selling shareholders

Selling Shareholders
--------------------

The Shares being offered for resale by our Selling Stockholders are issuable in
accordance with ss. 4(2) and Rule 506 under the Securities Act of 1933, as
amended (the "Securities Act"),

The offering includes shares required pursuant to a certain convertible
debenture date May 7, 2001 and the secured convertible debenture purchase
agreement dated December 31, 2001. Additionally, certain shares are being
offered for sale by our Selling Stockholders with piggyback registration rights.

Warrants and Options:
---------------------

In December, 2001, DDSI issued Warrants to purchase 1,500,000 common shares at
an exercise price the lesser of $.02 per share or the average of the lowest
three inter-day sales prices during the twenty (20) Trading Days immediately
prior to exercise. The Warrant provides that in no event shall the holder
beneficially own more than 4.999% of our outstanding common stock. These
Warrants are being canceled.







                                       39
<PAGE>



Recent Financing
----------------

         o        On December 31, 2001, DDSI entered into a Securities Purchase
                  Agreement (the "Agreement") that calls for the issuance of
                  $500,000 of 12% Convertible Debentures that can be converted
                  into shares of common stock.

Each holder of the 12% convertible debenture may not convert its securities into
shares of the Company's common stock if after the conversion, such holders,
together with any of its affiliates, would beneficially own over 4.999% of the
outstanding shares of the Company's common stock. This percent ownership
restriction may be waived by each holder on not less than 61 days' notice to the
Company. Since the number of shares of the Company's common stock issuable upon
conversion of the debentures will change based upon fluctuations of the market
price of the Company's common stock prior to a conversion, the actual number of
shares of the Company's common stock that will be issued under the debentures,
and consequently the number of shares of the Company's common stock that will be
beneficially owned by AJW Partners, New Millennium Capital Partners II and
Bristol Investment Fund, Ltd. cannot be determined at this time. Because of this
fluctuating characteristic, we agreed to register a number of shares of the
Company's common stock that exceeds the number of the Company's shares of common
stock currently beneficially owned by AJW Partners, New Millennium Capital
Partners II and Bristol Investment Fund, Ltd. The number of shares of the
Company's common stock listed in the table below as being beneficially owned by
AJW Partners, New Millennium Capital Partners II and Bristol Investment Fund,
Ltd. includes the shares of the Company's common stock that are issuable to AJW
Partners, New Millennium Capital Partners and Bristol Investment Fund, Ltd.
subject to the 4.999% limitation, upon conversion of their debentures and
exercise of their warrants. However, the 4.999% limitation would not prevent AJW
Partners, New Millennium Capital Partners and Bristol Investment Fund, Ltd. from
acquiring and selling in excess of 4.999% of the Company's common stock through
a series of conversions and sales under the debentures and acquisitions.

                              SELLING SHAREHOLDERS

The table below sets forth information concerning the resale of shares of Common
Stock by the Selling Stockholders. We will not receive any proceeds from the
resale of the Common Stock by the Selling Stockholders nor will we receive
proceeds from the exercise of the warrants. Furthermore, we are registering more
shares of Common Stock than the amount of Common Stock that is currently
beneficially owned by AJW Partners, New Millennium Capital Partners II and
Bristol Investment Fund, Ltd.

Assuming all the shares registered below are sold by the Selling Stockholders,
none of the Selling Stockholders will continue to own any shares of our Common
Stock.

The following table also sets forth the name of each person who is offering
shares of common stock by this prospectus, the number of shares of common stock
beneficially owned by each person, the number of shares of common stock that may
be sold in this offering and the number of shares of common stock each person
will own after the offering, assuming they sell all of the shares offered.
<TABLE>
<CAPTION>
                                              Shares Beneficially                Shares           Shares Beneficially
                                              Owned                              Offered          Owned After Offering
Selling                                       Prior to the                       For              If All Offered
Stockholder                                   Offering                           Sale (13)        Shares Are Sold
-----------                                   -----------------                  ---------        -------------------
                                              Number of Shares Percentage (4)                     Number of Shares Percentage
<S>                                           <C>                <C>            <C>               <C>                 <C>
AJW Partners, LLC (1)(6)                      5,554,944          4.999%         12,500,000  (5)           0            0%
New Millennium Capital Partners, LLC (2)(6)   5,554,944          4.999%         12,500,000  (5)           0            0%
Bristol Investment Fund, Ltd. (3)(6)          5,554,944          4.999%         25,000,000  (5)           0            0%
Robert Martin              (10)               1,300,000          0.912%          1,300,000                0            0%
Waikiki Beach Activities, Ltd. (10)(7)          700,000          0.490%            700,000                0            0%
Michael Gurin                    (10)           666,666          0.467%            666,666                0            0%
Vann Warren                (10)                 333,333          0.234%            333,333                0            0%
Barry Colman               (10)                 333,333          0.234%            333,333                0            0%
Steve Adams                (10)                 500,000          0.350%            500,000                0            0%
Majel Carroll              (10)                 333,333          0.234%            333,333                0            0%
Al Schibi                  (10)                 333,333          0.234%            333,333                0            0%
Al Schili, Jr.             (10)                 333,333          0.234%            333,333                0            0%
Kenneth Ripley             (10)                 666,666          0.467%            666,666                0            0%
Patrick V. Bonsignore      (10)                 666,666          0.467%            666,666                0            0%
Ed Boot                    (10)                 500,000          0.350%            500,000                0            0%
Anthony Vallaro            (10)                 500,000          0.350%            500,000                0            0%
Stanley Horn               (10)                 333,333          0.234%            333,333                0            0%
Baron Taylor               (10)                 500,000          0.350%            500,000                0            0%
Robert Gowell       (8)                       1,931,634          1.350%          1,931,634                0            0%
Rudy Hallenbeck     (9)                       1,252,069          0.878%          1,252,069                0            0%
Anthony Vallaro     (9)                         246,471          0.172%            246,471                0            0%
Stuart Beck        (11)                         394,671          0.276%            394,671                0            0%
The NIR Group      (12)                         360,000          0.252%            360,000                0            0%
</TABLE>


                                       40
<PAGE>

The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the conversion
of the debentures and exercise of the debenture warrants is subject to
adjustment depending on, among other factors, the future market price of the
common stock, and could be materially less or more than the number estimated in
the table.

It was represented to DDSI that none of the selling shareholders have existing
short positions.

No Selling Stockholder has held any position or office, or has had any material
relationship with us or any of our affiliates within the past three years with
the exception of Robert Martin and Robert Gowell. Mr. Martin was a Director in
2001 for approximately one month before resigning and Mr. Gowell recently was
placed on the Board of Directors by the present DDSI Board to fill a vacancy.

         None of the selling shareholders are broker-dealers or affiliates of
broker-dealers.

(1)      AJW Partners, LLC is a private investment fund that is structured as a
         limited liability company whose members are the investors in the fund.
         The managing member of the fund is SMS Group, LLC, a limited liability
         company, which manages the operations of the fund (the "Management
         Company"). The manager of the Management Company, Mr. Corey Ribotsky,
         is responsible for the operations of the Management Company. As the
         control person of the shares owned by AJW Partners, Mr. Ribotsky will
         be viewed as the beneficial owner of such shares pursuant to Rule 13d-3
         under the Securities Exchange Act of 1934.

 (2)     New Millennium Capital Partners II, LLC is a private investment fund
         that is structured as limited liability company whose members are the
         investors in the fund. The managing member of the fund is First Street
         Manager II, LLC, a limited liability company which manages the
         operations of the fund (the "Management Company"). The manager of the
         Management company, Mr. Corey Ribotsky, is responsible for the
         operations of the Management Company. As the control person of the
         shares owned by New Millennium Capital Partners II, Mr. Corey S.
         Ribotsky will be viewed as the beneficial owner of such shares pursuant
         to Rule 13d-3 under the Securities Exchange Act of 1934.

(3)      Bristol Investment Fund, Ltd. is a private investment fund, formed as a
         Cayman Island company, whose shares are owned by its investors. Bristol
         Investment Fund, Ltd., is managed by Bristol DLP, LLC (the "Management
         Company"), which has voting and investment control over the shares
         owned by Bristol Investment Fund, Ltd. Paul Kessler and Diana Kessler,
         the managing members of the Management Company, are responsible for the
         operations of the Management Company. As the control persons of the
         shares owned by Bristol Investment Fund, Ltd., Paul Kessler and Diana
         Kessler will be viewed as the beneficial owners of such shares pursuant
         to Rule 13d-3 under the Securities Exchange Act of 1934.






                                       41
<PAGE>

(4)      Percentages are based on 110,088,124 shares of our common stock
         outstanding (includes the shares in this Offering) as of October 4,
         2002.

(5)      Pursuant to the Registration Rights Agreement between us and the
         debenture holders, we are required to register such number of shares of
         common stock equal to the sum of (i) 200% of the number of shares of
         common stock issuable upon conversion in full of their debentures,
         assuming for such purposes that all interest is paid in shares of our
         common stock, that the Debentures are outstanding for one year and that
         such conversion occurred at a price as specified in the debentures
         respective agreements and (ii) the number of shares of Common Stock
         issuable upon exercise in full of the warrants. As a result of the
         contractual agreement not to exceed 4.999% beneficial ownership, the
         selling shareholder does not believe it is a control person as defined
         in the Securities Exchange Act of 1934 or is required to file a
         Schedule 13D. If 110,088,124 shares are outstanding, these referenced
         selling shareholders cannot own more than 5,554,944 shares each.

(6)      Independent third parties who invested in our December 31, 2001 bridge
         financing. In connection with our bridge financing of $500,000, we
         issued convertible debentures and warrants to purchase 1,500,000 shares
         of our common stock. These warrants are being canceled.

                                Convertible Notes
                           Issued on December 31, 2001

                           AJW Partners, LLC                      $125,000
                           NewMillennium Capital Partners, LLC    $125,000
                           Bristol Investment Fund, Ltd.          $250,000

                        ====================================================
                           Total                                  $500,000

(7)      The principal of this company is Robert P. Martin.

(8)      Underlying shares of $25,000 convertible note issued May 7, 2001 to
         Robert Gowell. Mr. Gowell is a Director of the Company.

(9)      Represents an adjustment to the number of shares of common stock
         required to be held in reserve to provide for the conversion of Mr.
         Hallenbeck's and Mr. Vollaro's notes registered on August 29, 2001 file
         number 333-59888.

(10)     Represents private placement shares issued pursuant to Regulation D,
         Sec 506, the Securities Act of 1933 (as "amended").

(11)     Represents restricted shares for services performed.

(12)     Represents restricted shares issued for services performed with
         registration rights. The controlling person is Mr. Corey S. Ribotsky.

(13)     This column represents the total number of shares of common stock that
         each selling security holder intends to sell, based on the current
         market price, regardless of the 4.999% limitation. AJW Partners, New
         Millennium Capital Partners and Bristol Investment Fund, Ltd. may
         acquire and sell more then 4.999% of common stock through the sale of
         conversions under the debentures.

The following information provides the dates the shares were acquired and what
services or assets were exchanged for the value of each.





                                       42
<PAGE>
<TABLE>
<CAPTION>

        Selling
        Stockholder                         Shares Offered    Price    Date            Asset/Services
        <S>                                 <C>               <C>      <C>             <C>
        AJW Partners, LLC*                  12,500,000        $0.02    12/31/2001      Convertible Debentures
        New Millennium Capital Partners*    12,500,000        $0.02    12/31/2001      Convertible Debentures
        Bristol Investment Fund, Ltd.*      25,000,000        $0.02    12/31/2001      Convertible Debentures
        Robert Martin                        1,300,000        $0.03    11/2/2001       Private Placement ($39,000)
        Waikiki Beach Activities, Ltd.         700,000        $0.03    11/2/2001       Private Placement ($21,000)
        Michael Gurin                          666,666        $0.03    11/2/2001       Private Placement ($20,000)
        Vann Warren                            333,333        $0.03    11/2/2001       Private Placement ($10,000)
        Barry Colman                           333,333        $0.03    11/2/2001       Private Placement ($10,000)
        Steve Adams                            500,000        $0.03    11/2/2001       Private Placement ($15,000)
        Majel Carroll                          333,333        $0.03    11/2/2001       Private Placement ($10,000)
        Al Schibi                              333,333        $0.03    11/2/2001       Private Placement ($10,000)
        Al Schibi, Jr.                         333,333        $0.03    11/2/2001       Private Placement ($10,000)
        Kenneth Ripley                         666,666        $0.03    11/2/2001       Private Placement ($20,000)
        Patrick V. Bonsignore                  666,666        $0.03    11/2/2001       Private Placement ($20,000)
        Ed Boot                                500,000        $0.03    11/2/2001       Private Placement ($15,000)
        Anthony Vollaro                        500,000        $0.03    11/30/2001      Private Placement ($15,000)
        Stanley Horn                           333,333        $0.03    12/24/2001      Private Placement ($10,000)
        Baron Tayler                           500,000        $0.03    12/24/2001      Private Placement ($15,000)
        Robert Gowell                        1,931,634        $0.015   5/7/2001        Convertible Note ($25,000 + 111,000 Warrants)
        Ralph Hallenbeck                     1,252,069        $0.038   9/24/2001       Convertible Note**
        Anthony Vollaro                        246,471        $0.034   9/25/2001       Convertible Note**
        Stuart Beck                            394,671        $0.03                    Accounts Payable/Legal Services
</TABLE>
*Conversion price in effect on any conversion date shall be the lesser of (1)
$.043 and (2) 50% of the average of the lowest three inter-day sales prices of
the Common Stock during the twenty trading days immediately preceding the
applicable conversion date.
**This transaction is for the difference in price from the SB-2 Registration
(File#333-59888) to actual conversion date.

                              Plan of Distribution

Each selling stockholders will most likely sell their shares on the OTCBB.

Therefore, the selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market, or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. There is no assurance that the selling stockholders
will sell any or all of the common stock in this offering. The selling
stockholders may use any one or more of the following methods when selling
shares:

        o         Ordinary brokerage transactions and transactions in which the
                  broker-dealer solicits purchasers.

        o         Block trades in which the broker-dealer will attempt to sell
                  the shares as agent but may position and resell a portion of
                  the block as principal to facilitate the transaction.

        o         Purchases by a broker-dealer as principal and resale by the
                  broker-dealer for its own account.

        o         An exchange distribution following the rules of the applicable
                  exchange

        o         Privately negotiated transactions

        o         Short sales or sales of shares not previously owned by the
                  seller

        o         Broker-dealers may agree with the selling stockholders to sell
                  a specified number of such shares at a stipulated price per
                  share

        o         A combination of any such methods of sale any other lawful
                  method






                                       43
<PAGE>

The selling stockholders may also engage in:

        o         Short selling against the box, which is making a short sale
                  when the seller already owns the shares.

        o         Other transactions in our securities or in derivatives of our
                  securities and the subsequent sale or delivery of shares by
                  the stockholder.

        o         Pledging shares to their brokers under the margin provisions
                  of customer agreements. If a selling stockholder defaults on a
                  margin loan, the broker may, from time to time, offer to sell
                  the pledged shares.

Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from selling stockholders in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission from the purchaser in amounts to be negotiated. The selling
stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.

The selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be considered to be "underwriters" within the meaning of
the Securities Act for such sales. An underwriter is a person who has purchased
shares from an issuer with a view towards distributing the shares to the public.
In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be considered to be
underwriting commissions or discounts under the Securities Act.

Because the following selling shareholders are "underwriters" within the meaning
of Section 2(11) of the Securities Act, they will be subject to the prospectus
delivery requirements:

        o         AJW Partners, LLC
        o         New Millennium Capital Partners, LLC
        o         Bristol Investment Fund, Ltd.

We are required to pay all fees and expenses incident to the registration of the
shares in this offering. However, we will not pay any commissions or any other
fees in connection with the resale of the common stock in this offering. We have
agreed to indemnify the selling shareholders and their officers, directors,
employees and agents, and each person who controls any selling shareholder, in
certain circumstances against certain liabilities, including liabilities arising
under the Securities Act. Each selling shareholder has agreed to indemnify the
Company and its directors and officers in certain circumstances against certain
liabilities, including liabilities arising under the Securities Act.

If we are notified by the selling stockholder that they have a material
arrangement with a broker-dealer for the resale of the common stock, then we
would be required to amend the registration statement of which this prospectus
is a part, and file a prospectus supplement to describe the agreements between
the selling stockholder and the broker-dealer.

                                Legal Proceedings

Robert Martin - Shareholder Threatened Lawsuit
----------------------------------------------

On January 19, 2002, DDSI's Board of Directors received a letter threatening
legal action from Mr. Robert P. Martin who purchased shares pursuant to a
private placement offering in October 2001. The letter alleged false and
misleading representations made to Mr. Robert Martin by Mr. Garrett Cohn (past
CEO) and Mr. Scott Gallagher (About Face Communications) involving convertible
debenture funding.





                                       44
<PAGE>

The shareholder has threatened a direct and derivative action suggesting the
convertible debt was not legally authorized.

Upon receipt of the threatened complaint, DDSI's Board of Directors had a
discussion with Mr. Martin where DDSI represented that it was in compliance with
the Company Bylaws, state and federal securities laws and that the current Board
of Directors were unaware of any fraudulent representations.

Therefore, DDSI disputes the allegations made in the complaint for the following
reasons, 1) the Company is unaware of any false and misleading misrepresentation
made by Mr. Garrett Cohn, 2) the threatened complaints received contained
insufficient information to make a determination of any wrong doing and 3) the
convertible debt was legally authorized by DDSI Board of Directors. Concerning
the legality of the convertible debt, there were three members on the Board of
Directors at the time this issue was voted on. Two board members were present
and voted on behalf of accepting the convertible debenture. In addition,
corporate counsel was contacted prior to the vote and after review of the
corporate bylaws indicated that pursuant to DDSI bylaws there was a quorum
present, therefore the business transacted by the Board would be legal and
binding. Thus, DDSI would vigorously defend itself against the allegations if
such actions were pursued. To date there has been no legal action filed.

AccuSoft - Action to Terminate Product Licenses
-----------------------------------------------

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

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

Since the initial filing of the action by AccuSoft Corporation, DDSI has stopped
using AccuSoft's ImageGear 6.0, 95 and 98 software and have replaced AccuSoft's
controls. The parties are in discussions and are close to reaching a settlement.

Should this matter go to court and DDSI receive an unfavorable ruling for
failing to terminate the use of the licenses, there may be some monetary
damages. Assuming the damages would be based on the generic royalty agreement,
the amount of damages would be minimal, or approximately $5,000 to $7,500.

                                     Experts

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2001 and 2000 as appears on the prospectus.

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2001, appearing in this Prospectus and Registration Statement have been audited
by Withum Smith&Brown, independent auditors, as set forth in their report
thereon (which contains an explanatory paragraph describing conditions that
raise a substantial doubt about the Company's ability to continue as a going
concern as described in Note 2 to the financial statements) appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2000, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
(which contains an explanatory paragraph describing conditions that raise a
substantial doubt about the Company's ability to continue as a going concern as
described in Note 2 to the financial statements) appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.






                                       45
<PAGE>

                                  Legal Matters

Legal matters concerning the issuance of shares of common stock offered in this
registration statement will be passed upon by Owen Naccarato, Attorney at Law.

                           Other Available Information

We are subject to the reporting requirements of the Securities and Exchange
Commission (the "Commission"). We file periodic reports, proxy statements and
other information with the Commission under the Securities Exchange Act of 1934.
We will provide without charge to each person who receives a copy of this
prospectus, upon written or oral request, a copy of any information that is
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference). Requests should be directed to: Garrett
Cohn

We have filed a registration statement on Form SB-2 under the Securities Act of
1933 Act with the Commission in connection with the securities offered by this
Prospectus. This Prospectus does not contain all of the information that is the
registration statement, you may inspect without charge, and copy our filings, at
the public reference room maintained by the Commission at 450 Fifth Street, N.W.
Washington, D.C. 20549. Copies of this material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W. Washington,
D.C. 20549, at prescribe rates.

Information about the public reference room is available from the commission by
calling 1-800-SEC-0330.

The commission maintains a web site on the Internet that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the commission. The address of the site is www.sec.gov.
Visitors to the site may access such information by searching the EDGAR archives
on this web site.

We have not authorized anyone to provide you with any information that is
different.

The selling security holders are offering to sell, and seeking offers to buy,
shares of common stock only in jurisdictions where such offers and sales are
permitted.

The information contained in this Prospectus is accurate as of the date of this
prospectus. We will keep this prospectus up to date and accurate.

                              Financial Statements

Our Financial Statements begin on page F-1

Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure

A Form 8-K was filed on February 7, 2002, and subsequently amended on February
19, 2002, respectively, reporting a change in accounting firms.

                  o    Ernst & Young LLP was previously the independent auditors
                       for Digital Descriptor Systems, Inc. (DDSI). On February
                       4, 2002, Ernst & Young LLP resigned as independent
                       auditors and Withum Smith & Brown, PC was engaged as
                       independent auditors. The decision to change was based on
                       financial considerations and was approved by the audit
                       committee and the full Board of Directors of DDSI.

                  o    The audit reports of Ernst & Young LLP on the financial
                       statements of DDSI as of and for the fiscal years ended
                       December 31, 2000 and 1999 did not contain an adverse
                       opinion or disclaimer of opinion and were not qualified
                       or modified as to uncertainty, audit scope or accounting
                       principles, except that such reports were modified with
                       respect to DDSI's ability to continue as a going concern.






                                       46
<PAGE>

                  o    During DDSI's two most recent fiscal years ended December
                       31, 2000, and the subsequent interim period ending
                       February 4, 2002, there were no disagreements between
                       DDSI and Ernst & Young LLP on any matter of accounting
                       principles or practices, financial statement disclosure,
                       or auditing scope and procedures, which if not resolved
                       to the satisfaction of Ernst & Young would have caused
                       Ernst & Young to make reference to the matter in their
                       report. DDSI has requested Ernst & Young to furnish it a
                       letter addressed to the Commission stating whether it
                       agrees with the above statements. A copy of that letter,
                       dated February 19, 2002, is filed as Exhibit 16 to the
                       Form 8-K, Amendment No. 1.

                  o    There were no other "reportable events" as that term is
                       described in Item 304(a)(1)(v) of Regulation S-K
                       occurring within DDSI's two most recent fiscal years and
                       the subsequent interim period ending February 4, 2002.

                  o    During DDSI's two most recent fiscal years ended December
                       31, 2001 and the subsequent interim period through
                       February 4, 2002, DDSI did not consult with Withum, Smith
                       & Brown, PC regarding any of the matters or events set
                       forth in Item 304 (a)(2)(i) and (ii) of Regulations S-K.









                                       47
<PAGE>




Part II.   Information Not Required In Prospectus
-------------------------------------------------

                    Indemnification of Directors and Officer

The Company's Certificate of Incorporation provides that a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.

The Company's Certificate of Incorporation provides that the Company shall
indemnify to the fullest extent permitted by law any person made or threatened
to be made a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative (a "legal action"), whether such legal Action be
by or in the right of the corporation or otherwise, by reason of the fact that
such person is or was a director or officer of the Company, or serves or served
at the request of the Company as a director or officer, of another corporation,
partnership, joint venture, trust or any other enterprise. In addition, the
Company's Certificate of Incorporation provides for indemnification of any
person made or threatened to be made a party to any Legal Action by reason of
the fact that such person is or was a director or officer of the Company and is
or was serving as a fiduciary of, or otherwise rendering to, any employee
benefit plan of or relating to the Company. The indemnification obligation of
the Company in the Certificate of Incorporation is permitted under Section 145
of the General Corporation Law of the State of Delaware.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable.

                   Other Expenses of Issuance and Distribution

Related to the securities being registered. The expenses shall be paid by the
Registrant.

SEC Registration Fee                        $   490.12
Printing and Engraving Expenses             $ 5,000.00
Legal Fees and Expenses                     $10,000.00
Accounting Fees and Expenses                $15,000.00
Transfer Agent Fees                         $ 5,000.00
Blue Sky Fees                               $ 1,000.00
Miscellaneous                               $ 5,000.00
                                            ----------
Total                                       $41,490.12










                                       48
<PAGE>



                     Recent Sales of Unregistered Securities

A total of 10,915,484 shares of common stock, par value $.001 (the "Shares"),
were issued by the Company from June 1999 through May 2000, for cash or services
rendered to the Company, absent registration under the Securities Act. These
shares were offered pursuant to the exemption provided by Regulation A where
such offering price was valued at $.30 per share.

From September through December 2000, the Company issued 1,205,000 restricted
shares of its common stock for services performed. These shares were valued at
market price. These shares were allocated as follows:

        o         9/29/00: 500,000 shares were issued to AJW Partners LLC,
        o         9/29/00: 500,000 shares were issued to New Millennium Capital
                  Partners II, LLC,
        o         10/27/00: 100,000 shares were issued to About Face
                  Communications, LLC, and
        o         12/28/00: 105,000 shares were issued to NIR Group LLC.

These four investors were sophisticated as defined by Section 4(2) in that they
each had sufficient knowledge and experience in financial and business matters
to be capable of evaluating the merits and risks of the proposed investment.
Furthermore, all four investors had access to information on the Company
necessary to make an informed investment decision. Thus, these shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

During December 2000, the Company issued $200,000 of convertible debentures to
two investors. A $100,000 note was issued to AJW Partners, LLC and a $100,000
note to New Millennium Capital Partners II, LLC. The debentures mature on
December 28, 2001 and accrue interest at 12% per annum. The holder has the right
to convert the debentures to common shares at any time through maturity at a
conversion price the lessor of: $0.08 per share or 50% of the average of the
lowest three trading prices during the 20 days preceding the conversion date.
The debenture holders also received warrants to purchase 400,000 common shares
at an exercise price of $0.036 per share at any time before December 28, 2003.
These debentures were issued under the exemption to registration provided by
Regulation D Rule 506.

During March 2001, the Company issued $200,000 of convertible debentures to two
investors. A $100,000 note was issued to AJW Partners, LLC and a $100,000 note
to New Millennium Capital Partners II, LLC. These debentures mature on March 4,
2002; however, the parties have entered into an agreement to extend the maturity
date for another year, and accrue interest at 12% per annum. The holder has the
right to convert the debentures to common shares at any time through maturity at
the conversion price as described in the agreement. The debenture holders
received warrants to purchase 200,000 common shares at an exercise price the
lesser of: $0.36 per share or the average of the lowest three trading prices
during the 20 days preceding the exercise date. The debentures are
collateralized by substantially all of the Company's assets. These debentures
were issued under the exemption to registration provided by Regulation D Rule
506.

During January through March 2001, the Company granted 1,100,000 shares of
restricted common stock for services performed to three consultants. Such shares
were valued at market price. These shares were allocated as follows:

        o         1/23/01: 1,000,000 shares were issued to Capital Corporation,
        o         2/1/01: 75,000 shares were issued to About Face Communication,
                  and
        o         3/1/01: 25,000 shares were issued to David Likes.






                                       49
<PAGE>

All three investors were sophisticated as defined by Section 4(2) of the
Securities Act of 1933, as amended, in that they each had sufficient knowledge
and experience in financial and business matters to be capable of evaluating the
merits and risks of the proposed investment. Furthermore, all three investors
had access to information on the Company necessary to make an informed
investment decision. Thus, these shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."

During March 29, 2001 through April 10, 2001, the Company granted 93,000 shares
and 75,000 shares respectively of restricted common stock for services performed
to About Face Communication. These shares were issued at market price. About
Face Corporation is sophisticated as defined by Section 4(2) in that it had
sufficient knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of the proposed investment.
Furthermore, they had access to information on the Company necessary to make an
informed investment decision. Thus, these shares were issued pursuant to the
exemption provided for under Section 4(2) of the Securities Act of 1933, as
amended, as a "transaction not involving a public offering."

During April 2001, the Company issued two convertible notes for $100,000 and
$15,000 respectively. Interest on these Notes shall be payable quarterly
commencing June 30, 2001. The holder has the right to convert the debentures and
interest accrued into shares of the Company's Common Stock at a conversion price
per share that shall be an amount equal to 50% of the mean average price of the
Common Stock for the ten (10) trading days prior to notice of conversion per
share. The underlying shares were registered on August 29, 2001, file number
33359888.
These shares were allocated as follows:

        o        A $100,000 note to Ralph Hallenbeck
        o        A $15,000 note to Anthony Vollaro

 These investors were sophisticated as defined by Section 4(2) of the Securities
 Act of 1933, as amended, in that they each had sufficient knowledge and
 experience in financial and business matters to be capable of evaluating the
 merits and risks of the proposed investment. Furthermore, both investors had
 access to information on the Company necessary to make an informed investment
 decision. Securities were issued pursuant to the exemption provided for under
 Section 4(2) of the Securities Act of 1933, as amended, as a "transaction not
 involving a public offering."

 During May 2001, the Company issued one convertible note for $40,000 to Robert
 Gowell, with interest at 10% per annum. Interest on these Notes shall be
 payable quarterly commencing June 30, 2001. The holder has the right to convert
 the debentures and interest accrued into shares of the Company's Common Stock
 at a conversion price per share that shall be an amount equal to 50% of the
 mean average price of the Common Stock for the ten (10) trading days prior to
 notice of conversion per share. In October 2001, $15,000 of the convertible
 note was paid. The parties have entered into an agreement to extend the
 maturity date of the remaining balance of $25,000 for another year. Securities
 were issued pursuant to the exemption provided for under Section 4(2) of the
 Securities Act of 1933, as amended, as a "transaction not involving a public
 offering."

During September 2001, the Company issued $400,000 of convertible debentures to
two investors. $200,000 was issued to AJW Partners, LLC and $200,000 to New
Millennium Capital Partners II, LLC. These debentures mature on September 30,
2002 and accrue interest at 12% per annum. The holder has the right to convert
the debentures to common shares at any time through maturity at the conversion
price as described in the note agreement. The debenture holders received
warrants to purchase 800,000 common shares at an exercise price the lesser of:
$0.036 per share or the average of the lowest three trading prices during the 20
days preceding the exercise date. Such warrants expire September 30, 2004. The
debentures are collateralized by substantially all of the Company's assets.
These debentures were issued under the exemption to registration provided by
Regulation D Rule 506.

During September 2001, $35,000 of the convertible debentures issued in December
2000 were converted into 1,000,000 shares of Common Stock. The underlying shares
were registered August 29, 2001 file number 33359888.






                                       50
<PAGE>

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

Ralph Hallenbeck is sophisticated as defined by Section 4(2) of the Securities
Act of 1933, as amended, in that he had sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the proposed investment. Furthermore, he had access to information on the
Company necessary to make an informed investment decision. These securities were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

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

Anthony Vollaro is sophisticated as defined by Section 4(2) of the Securities
Act of 1933, as amended, in that he had sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the proposed investment. Furthermore, he had access to information on the
Company necessary to make an informed investment decision. These securities were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

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

During October 2001 through January 2002, the remaining $165,000 of the
convertible debentures issued in December 2000, as well as $160,000 of the
convertible debentures issued in March 2001 were converted into 10,551,280
shares of common stock. Additionally, accrued interest relating to these notes
was converted into an additional 2,512,494 shares of common stock. The
underlying shares were registered August 29, 2001 file number 33359888.

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

These shares were allocated as follows:

    o  10/17/01: 150,000 shares were issued to NIR Group
    o  12/10/01: 300,000 shares were issued to Advocacy Group
    o  12/10/01: 85,000 shares were issued to Randy Hall
    o  12/10/01: 105,882 shares were issued to Rudy Hallenbeck
    o  12/10/01: 200 ,000 shares were issued to Jim Gilligan
    o  12/10/01: 200,000 shares were issued to Scott McBride
    o  12/10/01: 25,000 shares were issued to David Millery
    o  12/10/01: 25,000 shares were issued to Ken Blessing
    o  12/10/01: 25,000 shares were issued to Frank Guthart
    o  12/10/01: 100,000 shares were issued to George Rabine
    o  12/10/01: 50,000 shares were issued to Anthony Hill
    o  12/10/01: 400,000 shares were issued to Steve Randall
    o  12/10/01: 100,000 shares were issued to Don Brown
    o  12/10/01: 750,000 shares were issued to Scott Gallagher
    o  12/10/01: 41,949 shares were issued to Darlene Lazur
    o  12/10/01: 30,000 shares were issued to Stuart Johnson
    o  12/10/01: 123,000 shares were issued to Owen Naccarato
    o  1/02/02 :  360,000 shares were issued to NIR Group





                                       51
<PAGE>

All of the above investors were sophisticated as defined by Section 4(2) in that
they each had sufficient knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of the proposed
investment. Furthermore, all investors had access to information on the Company
necessary to make an informed investment decision. Thus, these shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

During October through December 2001, DDSI issued common stock via Subscription
Agreements to various individuals. Through January 2002, the company has raised
$240,000 through these agreements and has issued 8,000,000 shares at $0.05 per
share of common stock. These shares were issued under the exemption to
registration provided by Regulation D Rule 506. (See Selling Shareholders
schedule on page 42, footnote 10).

On December 31, 2001, DDSI issued three convertible debentures for an aggregate
amount of $500,000, with simple interest accruing at the annual rate of 12%. A
$125,000 note was issued to New Millennium Capital Partners II, LLC, a $125,000
note to AJW Partners, LLC and a $250,000 note to Bristol Investment Fund, Ltd.
These debentures are due December 31, 2002. Interest payable on the Debentures
shall be paid quarterly commencing March 30, 2002. The holders shall have the
right to convert the principal amount and interest due under the debentures into
shares of DDSI's common stock. The conversion price in effect on any Conversion
Date shall be the lesser of (1) $.043 and (2) 50% of the average of the lowest
three inter-day sales prices of the Common Stock during the twenty Trading Days
immediately preceding the applicable Conversion Date. The shares that will be
issued upon conversion of these debentures are being registered for resale
purposes by this registration statement. DDSI also issued common stock purchase
warrants for the right to purchase 1,500,000 shares of Common Stock of DDSI at
an exercise price per share equal to the lesser of (i) $.02 and (ii) the average
of the lowest three inter-day sales prices during the twenty (20) Trading Days
immediately prior to exercise. These shares were issued under the exemption to
registration provided by Regulation D Rule 506. These warrants are being
canceled.

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

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









                                       52
<PAGE>


<TABLE>
<CAPTION>
         Exhibits
Exhibit
Number            Description
------            -----------
<S>               <C>
2.1  (1)          Certificate of Incorporation of the Company.  Incorporated June 13, 1994.
2.2  (1)          Restated Articles of Incorporation of the Issuer, May 21, 1997.
2.3  (1)          Amended Articles of Incorporation.
2.3.1(5)          Amended Articles of Incorporation dated October 9, 2001
2.4  (1)          By-Laws of the Company.
4.1. (3)          Form of Warrant Agreement with Form of Warrant Election to Purchase
4.1.1(4)          Executed Warrant Agreement with AJW Partners, LLC
4.1.2(4)          Executed Warrant Agreement with New Millennium Capital Partners II, LLC
4.2.1.1.1(5)      Executed Stock Purchase Warrant Agreement with AJW Partners LLC
4.2.1(5)          Executed Stock Purchase Warrant Agreement with New Millennium Capital Partners II LLC
4.2.2(5)          Executed Stock Purchase Warrant Agreement with Bristol Investment Fund, Ltd.

4.3               Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC
4.3.1             Stock Purchase Warrant Agreement with AJW Offshore, Ltd.

5.1 (1)           Form of Voting Trust Agreement between Norman Cohn and Garrett U. Cohn.
5.1.1             Opinion re: Legality
5.1.3(5)          Legal Opinion to Investors
6.18 (1)          Security Agreement and Note dated as of August 14, 1996 in the principal
                  Amount of $125,000 made by Garrett U. Cohn in favor of the Company.
6.2   (1)         Resolution to Security Agreement between Norman Cohn and Garrett U. Cohn.
6.3   (1)         Employee 1997 Stock Option Plan adopted by the Board of Directors February 24, 1998 and subject to
                  stockholder ratification.
6.5   (1)         Warrant Agreement dated May 1, 1995 between the Company and Jay Teitlebaum.
6.6   (1)         Warrant Agreement dated June 16, 1995 between the Company and Norman Cohn.
                  Incorporated by reference: Form 10-KSB, period December 31,
                  1996, File No. 0-26604, Exhibit 4.4.
6.7   (1)         Lease for the Premises dated May 16, 2000.
6.8   (1)         Cohn Employment and Non-competition Agreement of Garrett U. Cohn dated July 7, 1994. Incorporated by reference:
                  Form 10-KSB, period December 31, 1996,
                  File No. 0-26604, Exhibit 10.1.
6.9   (1)         Employment Agreement for Michael Pellegrino.
6.9.1 (1)         Employment Agreement for Michael Ott.
6.9.2 (1)         Employment Agreement for Randolph Hall.
6.9.3(6)          Employment Agreement for Michael Pellegrino (2002)
6.9.4(6)          Employment Agreement for Randolph Hall (2002)
10.1 (2)          Software License and Royalty Agreement between Company and Harris Corporation
10.2 (2)          Agreement for Development of Finger/Slap Scanner Product between the Company and
                  ISC/U.S., Inc.
10.2.1(5)         Software License and Royalty Agreement between Company and AuthenTec
10.2.2(7)         Strategic Joint Venture Agreement between Company and i/tx.
10.3(3)           Form of Secured Convertible Debenture Purchase Agreement (December 28, 2000)
10.3.1(4)         Executed Secured Convertible Debenture Purchase Agreement
10.3.2(5)         Executed Securities Purchase Agreement
10.4(3)           Form of First Amendment to Secured Convertible Debenture Purchase Agreement
                  (March 5, 2001)
10.4.1(6)         Executed Amendment No. 1 to Securities Purchase Agreement dated December 31, 2001 10.5(3)
                  Form of 12% Convertible Debenture 10.5.1(4) Executed 12% Convertible Debenture with AJW Partners, LLC
10.5.2(4)         Executed 12% Convertible Debenture with New Millennium Capital Partners II, LLC
10.5.3.1 (5)      Executed Secured Convertible Debenture with AJW Partners LLC
10.5.4 (5)        Executed Secured Convertible Debenture with New Millennium Capital Partners II LLC
10.5.4.1 (5)      Executed Secured Convertible Debenture with Bristol Investment Fund, Ltd.

10.5.5            Secured Convertible Debenture with AJW Qualified Partners, LLC
10.5.5.1          Secured Convertible Debenture with AJW Offshore, Ltd.

10.6(3)           Form of Registration Rights Agreement
10.6.1(4)         Executed Registration Rights Agreement
10.6.2(5)         Executed Registration Rights Agreement
10.7 (3)          Form of Security Agreement
10.7.1(5)         Executed Security Agreement 10.8 (3) Form of 10% Convertible
                  Debenture
10.8.1(4)         10% Convertible Note to Robert Gowell
10.9(4)           Escrow Agreement
10.9.1(4)         Transfer Agent Instructions
10.9.2.1 (5)      Executed Escrow Agreement
10.9.3 (5)        Transfer Agent Instructions
10.10 (4)         Contract with DBA Systems, a Division of Titan Industries
10.11 (4)         Executed Second Amendment to Secured Convertible Debenture Purchase Agreement
10.12 (6)         Form of Private Placement Subscription Agreement

10.13             Private Placement Agreement Letter with AJW Qualified Partners, LLC and AJW Offshore, Ltd.

16.0 (1)          Letter re change in certifying accountant.
23.1              Consent of Counsel, Owen Naccarato (included in Exhibit 5.1.1)
23.2              Consent of independent auditors Ernst & Young
23.3              Consent of independent auditors Withum Smith &Brown
</TABLE>
(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






                                       53
<PAGE>



UNDERTAKINGS

The undersigned registrant hereby undertakes that it will:

Undertaking  (a)

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

    (i)   Include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;

    (ii)  Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement; and arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) ('230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of the
Registration Fee" table in the effective registration statement.

    (iii) Include any additional or changed material information on the plan of
distribution.

(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

Undertaking (e)

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.






                                       54
<PAGE>




Signatures
----------

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Fairless
Hills, PA 19030.

Registrant:       Digital Descriptor Systems, Inc.
<TABLE>
<CAPTION>

Signature                                   Title                                       Date
---------                                   -----                                       ----
<S>                                         <C>                                    <C>
By:      /s/Michael J. Pellegrino           President, Chief Operating Officer     October 10, 2002
         ---------------------------        Director
         Michael J. Pellegrino

</TABLE>

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated:

<TABLE>
<CAPTION>

Signature                                   Title                                       Date
---------                                   -----                                       ----
<S>                                 <C>                                            <C>
By:      /s/Robert Gowell                   Chief Executive Officer             October 10, 2002
         ----------------
         Robert Gowell                      Director - Co-chairman


By:      /s/ Michael J. Pellegrino          President, Chief Operating Officer  October 10, 2002
         -------------------------
         Michael J. Pellegrino              Director


By:      /s/ Anthony Shupin                 Director                            October 10, 2002
         ------------------
         Anthony Shupin


By:      /s/ Vincent Moreno                 Director                            October 10, 2002
         ------------------
         Vincent Moreno
</TABLE>













                                       55
<PAGE>



                        DIGITAL DESCRIPTOR SYSTEMS, INC.

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 and 2000

















<PAGE>




                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                        CONTENTS TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 and 2000




                                    Contents


Independent Auditors' Reports:                                               F-1



Audited Financial Statements


Balance Sheets                                                               F-3


Statements of Operations                                                     F-4


Statements of Shareholders' Equity (Deficiency)                              F-5


Statements of Cash Flows                                                     F-6


Notes to Financial Statements                                                F-8










<PAGE>


INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of Digital Descriptor Systems,
Inc., as of December 31, 2001, and the related statements of operations,
shareholders' equity (deficiency) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Digital Descriptor Systems,
Inc. as of December 31, 2001, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 2 to
the financial statements, the Company has never been profitable and continues to
incur losses from operations and anticipates that it will require additional
debt and/or equity financing in 2002, which may not be readily available. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.






/s/ WithumSmith+Brown

Newtown, Pennsylvania
March 23, 2002


<PAGE>


Report of Independent Auditors

The Board of Directors and Shareholders
Digital Descriptor Systems, Inc.

We have audited the accompanying balance sheet of Digital Descriptor Systems,
Inc. as of December 31, 2000, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Digital Descriptor Systems,
Inc. as of December 31, 2000, 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.

The accompanying financial statements have been prepared assuming that Digital
Descriptor Systems, Inc. will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has never been profitable and
continues to incur losses from operations and anticipates that it will require
additional debt and/or equity financing in 2001, which may not be readily
available. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans relating to these matters are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




                                                           /s/ Ernst & Young LLP


Philadelphia, Pennsylvania
March 23, 2001



<PAGE>
<TABLE>
<CAPTION>
                                            DIGITAL DESCRIPTOR SYSTEMS, INC.
                                                     BALANCE SHEETS

         ASSETS                                                                      December 31                June 30
                                                                              2001               2000            2002
                                                                              ----               ----            ----
Current Assets:                                                                       (Audited)               (Unaudited)
<S>                                                                        <C>               <C>              <C>
     Cash                                                                  $    435,662      $    202,877     $     42,542
     Restricted cash                                                              5,969            10,452            1,044
     Investment                                                                       -             1,000                -
     Accounts receivable, less allowance
        for uncollectible accounts of $87,930 and $114,000
        in 2001 and 2000,ands$74,410l(unaudited) in 2002, respectively          107,948           526,292           10,487
     Inventory                                                                    5,665            22,596           22,826
     Prepaid expenses                                                           267,534             8,698          346,620
     Advance - employees                                                           -                    -          110,066
     Debt discount and deferred financing costs                                 807,014           228,500          360,751
                                                                           ------------      ------------     ------------
            Total current assets                                              1,629,792         1,000,415          894,336

Note Receivable - Former Officer, Less Allowance
  for Uncollectible Notes of $177,400 and $-0-
  in 2001 and 2000, and $157,753 (unaudited) in 2002, respectively                    -           165,525                -
Software Development Costs                                                            -           413,604                -
Furniture and Equipment, Net                                                     37,090           172,046           18,875
Deposits and Other Assets                                                        24,395            31,454           24,395
                                                                           ------------      ------------     ------------
         TOTAL ASSETS                                                      $  1,691,277      $  1,783,044     $    937,606
                                                                           ============      ============     ============
         LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
     Accounts payable                                                      $    418,764      $    481,163     $    337,735
     Accrued expenses                                                           157,463           189,209          331,392
     Accrued payroll and related withholdings                                         -                 -          173,929
     Deferred income                                                            854,618           854,787          818,572
     Current portion of equipment loan                                            7,211             7,147            7,233
     Convertible debentures                                                     965,000           200,000        1,006,731
                                                                           ------------      ------------     ------------
         Total Current Liabilities                                            2,403,056         1,732,306        2,501,763

Equipment Loan, Net of Current Portion                                           20,066            28,626           16,447
                                                                           ------------      ------------     ------------
         Total Liabilities                                                    2,423,122         1,760,932        2,518,210

Shareholders' Equity (Deficiency):
     Preferred stock, $.01 par value: authorized shares - 1,000,000;
         issued and outstanding shares - none                                         -                 -                -
     Common stock, $.001 par value: authorized shares - 150,000,000;
         issued and outstanding shares - 48,045,610 at December 31, 2001         48,045            20,011           58,156
     Additional paid-in capital                                              16,726,819        14,544,579       16,782,748
     Accumulated deficit                                                    (17,524,988)      (14,542,478)     (18,421,508)
                                                                           ------------      ------------     ------------
         Total Shareholders' Equity (Deficiency)                               (750,124)          22,112        (1,580,604)
                                                                           ------------      ------------     ------------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)           $  1,672,998      $  1,783,044     $    937,606
                                                                           ============      ============     ============
</TABLE>


The Notes to Financial Statements are an integral part of these statements.

                                       F-3





<PAGE>
<TABLE>
<CAPTION>

                                             DIGITAL DESCRIPTOR SYSTEMS, INC.
                                                 STATEMENTS OF OPERATIONS

                                                                  Year Ended December 31         Six Months Ended June 30
                                                                  2001          2000                2002          2001
                                                                  ----          ----                ----          ----
                                                                         (Audited)                      (Unaudited)
<S>                                                              <C>          <C>                <C>          <C>
 Revenues:
      Software                                                  $   938,654   $ 2,060,499        $   52,941   $   341,311
      Hardware                                                       94,350       229,525            27,692        48,574
      Maintenance                                                   520,837       583,349           314,590       268,918
      Consulting                                                     68,863        91,249                          34,500
      Other                                                         104,003        61,836            18,665        31,955
                                                                -----------   -----------        ----------   -----------
         Total Revenues                                           1,726,707     3,026,458           414,158       725,528

 Costs and Expenses:
      Cost of revenues                                              708,703     1,615,286            82,013       269,788
      General and administrative                                  1,705,242     1,843,336           510,565       917,244
      Sales and marketing                                           454,169       917,381            57,238       306,561
      Research and development                                      383,217       536,350           151,375       140,094
      Write-off of software development costs                       413,604             -                 -             -
      Provision for doubtful note receivable - former officer       177,400             -                 -             -
      Depreciation                                                  138,452       162,330            18,214       120,666
      Interest and amortization of deferred debt costs              753,029         1,775           515,569       288,934
      Other (income) expense, net                                   (24,599)      (19,948)          (24,296)      (14,391)
                                                                -----------   -----------        ----------   -----------
          Total Costs and Expenses                                4,709,217     5,056,510         1,310,678     2,028,896
                                                                -----------   -----------        ----------   -----------
 Net Loss                                                       $(2,982,510)  $(2,030,052)       $ (896,520)  $(1,303,638)
                                                                ===========   ===========        ==========   ===========

 Net Loss Per Common Share (Basic and Diluted)                      $ (0.12)      $ (0.11)          $ (0.02)      $ (0.06)
                                                                ===========   ===========        ==========   ===========
 Weighted Average Number of Common Shares Outstanding:
      Basic and Diluted                                          24,436,773    18,557,547        53,844,741    21,174,779
                                                                ===========   ===========        ==========   ===========

</TABLE>


The Notes to Financial Statements are an integral part of these statements.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>
                                                  DIGITAL DESCRIPTOR SYSTEMS, INC.
                                           STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                        FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND THE SIX MONTHS ENDED JUNE 30, 2002

                                                             Common Stock                                              Shareholders'
                                                         -------------------    Additional    Unearned     Accumulated     Equity
                                                           Shares     Amount Paid-in Capital Compensation    Deficit    (Deficiency)
                                                         ----------  ------- --------------- ------------ ------------  -----------
<S>                                                      <C>         <C>     <C>             <C>          <C>           <C>
 Balance at December 31, 1999                            14,380,127  $14,380   $12,957,544    $(14,000)   $(12,512,426)   $ 445,498
            Issuance of common shares in connection
                with a Reg. A Offering, net of offering
                costs                                     4,426,485    4,426     1,159,640           -               -    1,164,066
            Issuance of common stock for services         1,205,000    1,205       259,895           -               -      261,100
            Debt discount relating to the beneficial
                conversion feature on convertible
                debentures and issuance of warrants               -        -       167,500           -               -      167,500
            Amortization of unearned compensation                 -        -             -      14,000               -       14,000
            Net loss                                              -        -             -           -      (2,030,052)  (2,030,052)
                                                         ----------  -------   -----------    --------    ------------   ----------
 Balance at December 31, 2000                            20,011,612   20,011    14,544,579           -     (14,542,478)      22,112

            Issuance of common shares in connection
                with a Reg. A Offering, net of offering
                costs                                     7,999,996    8,000       221,000           -               -      229,000
            Issuance of common stock for services         4,328,831    4,329       409,993           -               -      414,322
            Conversions of convertible debentures to
                  common stock                           15,705,171   15,705       494,747           -               -      510,452
            Debt discount relating to the beneficial
                conversion feature on convertible
                debentures and issuance of warrants               -        -     1,056,500           -               -    1,056,500
            Net loss                                              -        -             -           -      (2,982,510)  (2,982,510)
                                                         ----------  -------   -----------    --------    ------------   ----------
 Balance at December 31, 2001                            48,045,610   48,045    16,726,819           -     (17,524,988)    (750,124)

            Issuance of common stock for services           360,000      360        14,040           -                       14,400
            Conversions of convertible debentures to
                  common stock (unaudited)                4,659,968    4,660        27,711                                   32,371
            Net loss                                              -        -             -           -        (464,831)    (464,831)
                                                         ----------  -------   -----------    --------    ------------   ----------
 Balance at March 31, 2002 (Unaudited)                   53,065,578   53,065    16,768,570           -     (17,989,819)  (1,168,184)

            Conversions of convertible debentures to
                  common stock (unaudited)                5,090,912    5,091        14,178                                   19,269
            Net loss                                              -        -             -           -        (431,689)    (431,689)
                                                         ----------  -------   -----------    --------    ------------   ----------
 Balance at June 30, 2002 (Unaudited)                    58,156,490   58,156    16,782,748           -     (18,421,508)  (1,580,604)
</TABLE>



                                       F-5






<PAGE>


<TABLE>
<CAPTION>
                                                  DIGITAL DESCRIPTOR SYSTEMS, INC.
                                                      STATEMENTS OF CASH FLOWS

                                                                                Year Ended December 31    Six Months Ended June 30
                                                                                  2001          2000           2002         2001
                                                                                  ----          ----           ----         ----
                                                                                      (Audited)                   (unaudited)
                                                                                      ---------                   -----------
<S>                                                                            <C>           <C>             <C>         <C>
Cash Flows from Operating Activities:
     Net loss                                                                   $(2,982,510) $ (2,030,052)   $(896,520) $(1,303,638)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation                                                               138,452       162,330       18,215      120,666
         Write-off of software development costs                                    413,604             -            -            -
         Provision for doubtful note receivable - former officer                    177,400             -            -            -
         Compensation expense in connection with issuance of Common Stock                                            -      186,530
         Common stock issued for services received                                  414,322       261,100       14,400            -
         Amortization of deferred financing costs and debt discounts related
            to the issuance of warrants and the beneficial conversion
            feature of convertible debentures                                       676,486             -      456,513      284,259
         Amortization of unearned compensation                                            -        14,000            -            -
         Changes in assets and liabilities:
            Accounts receivable                                                     418,344       330,303       97,462       (4,627)
            Inventory                                                                16,931        26,097      (17,161)     (20,301)
            Prepaid expenses, deposits and other assets                            (251,777)      (19,219)     (79,086)    (169,736)
            Advances - employees                                                          -             -     (110,066)           -
            Accounts payable                                                        (62,399)      360,026      (81,029)     101,530
            Accrued expenses                                                         21,985        24,395           92     (142,741)
            Accrued payroll and related withholdings                                      -             -      173,929            -
            Deferred income                                                            (169)     (463,147)    (135,946)     587,945
                                                                                -----------   -----------    ---------  -----------
                Net Cash Used in Operating Activities                            (1,019,331)   (1,334,167)    (459,197)    (360,113)

Cash Flows from Investing Activities:
     Proceeds from sale of  investment                                                1,000             -            -            -
     Purchase of furniture and equipment                                             (3,496)      (30,325)           -       (3,496)
     (Increase) Decrease in note receivable - former officer                        (11,875)      (11,875)           -       (5,937)
     (Increase) Decrease in restricted cash                                           4,483        99,548        4,925            -
                                                                                -----------   -----------    ---------  -----------
                Net Cash Provided by (Used in) Investing Activities                  (9,888)       57,348        4,925       (9,433)

Cash Flows from Financing Activities:
     Net proceeds from issuance of common stock                                     229,000     1,164,066            -            -
     Proceeds from the issuance of convertible debentures, net
         of issuance costs of $198,500 in 2001 and $61,000 in 2000                1,056,500       139,000       75,000      355,000
     Payment of convertible debentures                                              (15,000)            -            -            -
     Deferred financing costs                                                             -             -      (10,250)     (31,000)
     Repayment of equipment loan                                                     (8,496)         (593)      (3,597)      (3,565)
                                                                                -----------   -----------    ---------  -----------
                Net Cash Provided by Financing Activities                         1,262,004     1,302,473       61,153      320,435
                                                                                -----------   -----------    ---------  -----------

Net Increase (Decrease) in Cash                                                     232,785        25,654     (393,119)     (49,111)

Cash at Beginning of Year/Period                                                    202,877       177,223      435,661      202,877
                                                                                -----------   -----------    ---------  -----------

Cash at End of Year/Period                                                      $   435,662     $ 202,877    $  42,542  $   153,766
                                                                                ===========   ===========    =========  ===========
</TABLE>


The Notes to Financial Statements are an integral part of these statements.

                                      F-6


<PAGE>
<TABLE>
<CAPTION>
                                              DIGITAL DESCRIPTOR SYSTEMS, INC.
                                                  STATEMENTS OF CASH FLOWS


                                                                          Year Ended December 31  Six Months Ended June 30
                                                                            2001          2000         2002       2001
                                                                            ----          ----         ----       ----
                                                                                                         (unaudited)
<S>                                                                         <C>           <C>          <C>        <C>
Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------

     Cash paid during the year for:
         Interest                                                        $    7,263     $  1,775     $ 1,937     $4,675
                                                                         ==========     ========     =======     ======
         Income taxes                                                    $        -     $      -     $     -     $    -
                                                                         ==========     ========     =======     ======

     Supplemental Disclosure of Non-Cash Investing
       and Financing Activities:

         Acquisition of equipment with loan                              $        -     $ 36,366     $     -     $    -
                                                                         ==========     ========     =======     ======

         Debt discount relating to the issuance of warrants
            and the beneficial conversion features of convertible debt   $1,056,500     $167,500     $     -     $    -
                                                                         ==========     ========     =======     ======

         Conversion of $475,000 of debentures and $35,452 of accrued
            interest into common stock                                   $  510,452     $      -     $     -     $    -
                                                                         ==========     ========     =======     ======

         Conversion of $33,269 of debentures and $18,371 of accrued
            interest into common stock                                   $        -     $      -     $51,640     $    -
                                                                         ==========     ========     =======     ======

</TABLE>


The Notes to Financial Statements are an integral part of these statements.

                                      F-7


<PAGE>

                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS



Note 1 - Description of Business:
---------------------------------

           Digital Descriptor Systems, Inc. (the "Company") incorporated in
           Delaware in 1994, develops, assembles and markets computer
           installations consisting of hardware and software, which capture
           video and scanned images, link the digitized images to text and store
           the images and text on a computer database and transmit this
           information to remote locations. The principal product of the Company
           is the Compu-Capture Law Enforcement Program, which is marketed to
           law enforcement agencies and jail facilities and generated the
           majority of the Company's revenues during the years ended December
           31, 2001 and 2000, and for the six months ended June 30, 2002 and
           2001. Substantially all of the Company's revenues are derived
           principally from state and local governments.

Note 2 - Summary of Significant Accounting Policies:
----------------------------------------------------
           Significant accounting policies followed by the Company in the
           preparation of the accompanying financial statements are summarized
           below:

              A. Basis of Financial Statement Presentation
              --------------------------------------------

                 The financial statements of the Company have been prepared
                 assuming the Company will continue as a going concern, which
                 contemplates the realization of assets and the satisfaction of
                 liabilities in the normal course of business. The Company has
                 never been profitable and has incurred substantial losses from
                 operations of $2,982,510 and $2,030,052 for the years ended
                 December 31, 2001 and 2000, respectively and, $896,520 and
                 $1,303,638 for the six months ended June 30, 2002 and 2001,
                 respectively. The Company expects that losses from operations
                 will continue through 2002 and the Company anticipates that it
                 will require additional financing in 2002, which may not be
                 readily available. These factors raise substantial doubt about
                 the Company's ability to continue as a going concern. The
                 Company's plans include expanding the sale and acceptance of
                 its core business solutions by hiring additional sales
                 resources and increased marketing activities. The Company is
                 also pursuing FBI Certification and introduction to the
                 marketplace of the Compu-Scan 3000 fingerprint-capturing
                 device. However, there can be no assurances that the Company
                 will be successful in their efforts to generate profitable
                 operations. The financial statements do not include any
                 adjustments that might result from the outcome of this
                 uncertainty. Financial presentation may have been changed due
                 to reclassifications of certain items.


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

              C. Interim Financial Information
              ---------------------------------

                 The financial statements and disclosures included herein for
                 the six months ended June 30, 2002 and 2001 are unaudited.
                 These financial statements and disclosures have been prepared
                 by the Company in accordance with accounting principles
                 generally accepted in the United States for interim financial
                 information. Accordingly, they do not include all of the
                 information and footnotes required by accounting principles
                 generally accepted in the United States for complete financial
                 statements. In the opinion of management, all adjustments
                 (consisting of adjustments of a normal and recurring nature)
                 considered necessary have been included. Operating results for
                 the six month periods ended June 30, 2002 and 2001 are not
                 necessarily indicative of the results that may be expected for
                 the year ended December 31, 2002.

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





                                       F-8
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


              E. Revenue Recognition
              ----------------------
                 The Company derives revenue from the sale of hardware,
                 software, post customer support (PCS), and other related
                 services. PCS includes telephone support, bug fixes, and rights
                 to upgrades on a when-and-if-available basis. Other related
                 services include basic consulting and training. Included with
                 the hardware is software that is not considered to be
                 incidental. Revenue from transactions with customers where the
                 software component is not considered to be incidental is
                 allocated between the hardware and software components based on
                 the relative fair value of the respective components.

                 The Company also derives revenue from the sale of software
                 without a related hardware component. Revenue allocable to
                 software components is further allocated to the individual
                 deliverable elements of the software portion of the arrangement
                 such as PCS and other services. In arrangements that include
                 rights to PCS for the software and/or other services, the
                 software component arrangement fee is allocated among each
                 deliverable based on the relative fair value of each of the
                 deliverables determined using vendor-specific objective
                 evidence, which has been established by the separate sales of
                 these deliverables.

                 The Company recognizes the revenue allocable to hardware and
                 software licenses upon delivery of the product to the end-user,
                 unless the fee is not fixed or determinable or collectibility
                 is not probable. If collectibility is not considered probable,
                 revenue is recognized when the fee is collected. Revenue
                 allocable to PCS is recognized on a straight-line basis over
                 the period the PCS is provided. Revenue allocable to other
                 services is recognized as the services are provided.

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

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

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

              G. Long-Lived Assets
              --------------------
                 The Company evaluates impairment of its intangible and other
                 long-lived assets in accordance with Statement of Financial
                 Accounting Standards No. 121, "Accounting for the Impairment of
                 Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
                 In making such determination, management compares the estimated
                 future cash flows, on an undiscounted basis, of the underlying
                 operations or assets with their carrying value to determine if
                 any impairment exists. If impairment exists, any adjustment is
                 determined by comparing the carrying amount to the fair value
                 of the impaired asset.



                                       F-9
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS



Note 2 - Summary of Significant Accounting Policies (Cont'd):
-------------------------------------------------------------

              H. Software Development Costs
              -----------------------------
                 The Company capitalizes software development costs after
                 technological feasibility of the software is established and
                 through the product's availability for general release to the
                 Company's customers. Technological feasibility of the Company's
                 software development costs is determined when the planning,
                 designing, coding, and testing activities are completed, and
                 the Company has established that the product can be produced to
                 meet its design specifications. All costs incurred in the
                 research and development of new software products and costs
                 incurred prior to the establishment of technological
                 feasibility are expensed as incurred. During 1999, $413,604 was
                 capitalized as software development costs in connection with
                 the Company's new product entitled Compu-Scan, a computerized
                 inkless fingerprint device. During 2000, the Company submitted
                 this product for approval to the FBI. In 2001, due to
                 uncertainty as to whether the Company will be able to obtain
                 funding needed to complete development and the FBI approval
                 process, the Company wrote down the asset to a net realizable
                 value of $-0-.

              I. Income Taxes
              ---------------
                 The Company provides for income taxes under the liability
                 method. Deferred income taxes differences result from
                 differences in the timing of recognition by the Company of
                 certain expenses, the periods of depreciation of certain assets
                 and net operating loss carryforwards.

              J. Accounting for Stock Options
              -------------------------------
                 Financial Accounting Standards Board issued Statement No. 123
                 (SFAS 123), "Accounting for Stock-Based Compensation." SFAS 123
                 provides companies with a choice to follow the provisions of
                 SFAS 123 in determination of stock-based compensation expense
                 or to continue with the provisions of Accounting Principles
                 Board Opinion No. 25 (APB 25). The Company has elected to
                 follow the provisions of APB 25. Under APB 25, if the exercise
                 price of the Company stock options equals or exceeds the market
                 price of the underlying Common Stock on the date of grant, no
                 compensation expense is recognized. The effect of applying SFAS
                 123 to the Company's stock-based awards results in net loss and
                 net loss per common share that are disclosed on a pro forma
                 basis in Note 9.

              K. Net Loss Per Common Share
              ----------------------------
                 Basic loss per share is calculated by dividing the net loss by
                 the weighted average common shares outstanding for the period.
                 Diluted loss per share is calculated by dividing the net loss
                 by the weighted average common shares outstanding of the period
                 plus the dilutive effect of common stock equivalents. No
                 exercise of common stock equivalents were assumed during any
                 period because the assumed exercise of these securities would
                 be anti-dilutive.

              L. 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.

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




                                      F-10
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


              N. Impact of Recent Accounting Pronouncements
              ---------------------------------------------
                 In August 2001, the FASB issued SFAS No. 144 "Accounting for
                 the Impairment or Disposal of Long-Lived Assets, which
                 addresses financial accounting and reporting for the impairment
                 or disposal of long-lived assets and supercedes SFAS No. 121,
                 Accounting for the Impairment of Long-Lived Assets to be
                 Disposed Of. Statement 144 is effective for the Company
                 beginning on January 1, 2002. The Company does not expect that
                 the adoption of SFAS No. 144 will have a significant impact on
                 the Company's financial position or results of operations.

                 In June 2001, the FASB issued SFAS No. 141, Business
                 Combinations, and No. 142 Goodwill and Other Intangible Assets,
                 effective for fiscal years' beginning after December 15, 2001.
                 Under the new rules goodwill and intangible assets deemed to
                 have indefinite lives will no longer be amortized but will be
                 subject to annual impairment tests in accordance with the
                 Statements. Other intangible assets will continue to be
                 amortized over their useful lives. The adoption of this
                 statement will have not have a significant impact on the
                 Company's financial position or results of operations.

                 In June 1999, the Financial Accounting Standards Board ("FASB")
                 issued Statement of Financial Accounting Standards No. 133,
                 "Accounting for Derivatives and Hedging Activities" (SFAS 133),
                 which established accounting and reporting standards for
                 derivative instruments, including certain derivative
                 instruments embedded in other contracts (collectively referred
                 to as derivatives), and for hedging activities. SFAS 133 is
                 effective for fiscal years beginning after June 15, 2000. Under
                 SFAS 133, accounting for changes in fair value of a derivative
                 depends on its intended use and destination. The Company
                 adopted SFAS 133 during the first quarter of 2001. The adoption
                 did not have a significant impact on the Company's financial
                 position or results of operations.





                                      F-11
<PAGE>



                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


Note 3 - Note Receivable - Former Officer:
------------------------------------------
         During 1996, the Company loaned the former President (departed January
         25, 2002) of the Company $125,000 evidenced by a promissory note. The
         note bore interest at the prime rate plus 1%, and was payable together
         with the principal on August 13, 1999. The Company's Board of Directors
         agreed to extend the maturity date of this note indefinitely. At
         December 31, 2001 and 2000, and March 31, 2002, accrued interest,
         included in the note receivable in the accompanying balance sheet was
         $52,400, $40,525 and $32,753 (unaudited), respectively. In 2001, due to
         uncertainty as to whether the Company will collect the note, a reserve
         for uncollectible notes was recorded in the amount of $177,400. In the
         first quarter of 2002, the Company received $19,647 of payments
         (unaudited) on the loan.

Note 4 - Furniture and Equipment:
---------------------------------
         Furniture and equipment consists of the following:
<TABLE>
<CAPTION>

                                                    December 31
                                                    -----------           June 30, 2002
                                                2001          2000          (Unaudited)
                                                ----          ----          -----------
         <S>                                  <C>           <C>              <C>
         Furniture and fixtures               $186,705      $186,705         $186,705
         Computer equipment                    274,945       271,449          274,945
         Vehicles                               59,049        59,049           59,049
         Leasehold improvements                 34,977        34,977           34,977
                                              --------      --------         --------
                                               555,676       552,180          555,676
         Less accumulated depreciation         518,586       380,134          536,801
                                              --------      --------         --------
                                              $ 37,090      $172,046         $ 18,875
                                              ========      ========         ========
</TABLE>
         Depreciation and amortization included as a charge to operations
         amounted to $138,452 and $162,330 for the years ended December 31, 2001
         and 2000, and $18,215 and $120,666 for the six months ended June 30,
         2002 and 2001, respectively.


Note 5 - Convertible Debentures:
--------------------------------


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

         During April through June 2002, $19,269 (unaudited) of the convertible
         debentures issued in March 2001 were converted into 5,090,912
         (unaudited) shares of Common Stock. In addition, in June 2002, a 12%
         convertible promissory note for $75,000 was issued to two investors.
         The conversion price is (i) 50% of the average of the lowest three
         inter-day sales prices, or (ii) if the common stock is then traded on
         the OTC Bulletin Board or Pink Sheets, the prices asked by any person
         or entity acting as a market maker in the common stock during the
         twenty trading days immediately preceding the applicable Conversion
         Date.

         During January through March 2002, $14,000 (unaudited) of the
         convertible debentures issued in March 2001 were converted into
         2,456,140 (unaudited) shares of Common Stock. Additionally, accrued
         interest of $18,371 (unaudited) relating to these notes was converted
         into an additional 2,203,828 (unaudited) shares of Common Stock.

         On December 31, 2001 the Company issued three convertible debentures
         for an aggregate amount of $500,000. The debentures are due December
         31, 2002 and accrue interest at the rate of 12% per annum. Interest on
         the debentures shall be paid quarterly commencing March 31, 2002. The
         holders have the right to convert the principal amount plus accrued
         interest into shares of the Company's common stock at any time through
         maturity. The conversion price in effect on any Conversion Date shall
         be the lesser of $.043 per share or 50% of the average of the lowest
         three inter-day sales prices during the twenty Trading Days immediately
         preceding the applicable Conversion Date. The Company also issued
         common stock purchase warrants for the right to purchase 1,500,000
         shares of common stock of the Company at an exercise price per share
         equal to the lesser of $.02 or the average of the lowest three
         inter-day sales prices during the twenty Trading Days immediately prior
         to exercise. The estimated fair value of the warrants of $37,500 and
         the intrinsic value of the beneficial conversion feature of $385,000
         have been allocated to paid-in capital. This resulting debt discount
         plus $77,500 of financing charges is being amortized on a straight-line
         basis over the term of the debentures. The debentures are
         collateralized by substantially all of the Company's assets.




                                      F-12
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


         During September 2001, the Company issued two convertible debentures
         for an aggregate amount of $400,000. These debentures are due on
         September 30, 2002 and accrue interest at the rate of 12% per annum.
         Interest on the debentures shall be paid quarterly commencing December
         31, 2001. The holders have the right to convert the principal amount
         plus accrued interest into shares of the Company's common stock at any
         time through maturity. The conversion price in effect on any Conversion
         Date shall be the lesser of $.08 per share or 50% of the average of the
         lowest three inter-day sales prices during the ten Trading Days
         immediately preceding the applicable Conversion Date. The Company also
         issued common stock purchase warrants for the right to purchase 800,000
         shares of common stock of the Company at an exercise price per share
         equal to the lesser of $.36 or the average of the lowest three closing
         sales prices for the common stock during the twenty Trading Days
         immediately prior to exercise. The estimated fair value of the warrants
         of $48,000 and the intrinsic value of the beneficial conversion feature
         of $262,000 have been allocated to paid-in capital. This resulting debt
         discount plus $90,000 of financing charges is being amortized on a
         straight-line basis over the term of the debentures. The debentures are
         collateralized by substantially all of the Company's assets.

         During April 2001 and May 2001, the Company issued three convertible
         notes for an aggregate amount of $155,000 and accrue interest at the
         rate of 10% per annum. Interest on the debentures shall be paid
         quarterly commencing June 30, 2001. The holders have the right to
         convert the principal amount plus accrued interest into shares of the
         Company's common stock thirty days prior to the maturity date. The
         conversion price in effect on any Conversion Date shall be an amount
         equal to 50% of the mean average price of the common stock for the ten
         trading days prior to notice of conversion. The intrinsic value of the
         beneficial conversion feature of $155,000 has been allocated to paid-in
         capital. This resulting debt discount is being amortized on a
         straight-line basis over the term of the debentures. The debentures are
         collateralized by substantially all of the Company's assets. During
         September 2001, $115,000 of the notes were converted into 1,498,540
         shares of free trading common stock and 1,252,069 shares of restricted
         stock at conversion prices ranging between of $.03895 and $.034 per
         share. In addition, $5,078 of accrued interest related to the
         debentures was converted into 132,827 shares of common stock. On the
         conversion date, the unamortized portion of the debt discount related
         to the converted debt, in the amount of $11,329, was charged to
         interest expense. In October 2001, $15,000 of the convertible
         debentures were paid. The parties have entered into an agreement to
         extend the maturity date of the remaining balance of $25,000 for
         another year.

         During March 2001, the Company issued two convertible debentures for an
         aggregate amount of $200,000 with a maturity date of March 4, 2002. The
         debentures accrue interest at the rate of 12% per annum. The holders
         have the right to convert the principal amount plus accrued interest
         into shares of the Company's common stock at any time through maturity.
         The conversion price in effect on any Conversion Date shall be the
         lesser of $.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 200,000 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 during the twenty Trading Days immediately prior to the date of
         exercise. The estimated fair value of the warrants of $64,000 and the
         intrinsic value of the beneficial conversion feature of $105,000 have
         been allocated to paid-in capital. This resulting debt discount plus
         $31,000 of financing charges is being amortized on a straight-line
         basis over the term of the debentures. The debentures are
         collateralized by substantially all of the Company's assets. During
         November 2001 through December 2001, $160,000 of the debentures were
         converted into 6,309,526 shares of common stock. On the conversion
         date, the unamortized portion of the debt discount and deferred
         financing costs related to the converted debt, in the amount of
         $40,479, was charged to interest expense.




                                      F-13
<PAGE>



                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


         Note 5 - Convertible Debentures (Cont'd):
         -----------------------------------------

         During December 2000, the Company issued $200,000 of convertible
         debentures to two investors. The debentures accrue interest at 12% per
         annum. The holder has the right to convert the debentures to common
         shares at any time through maturity at a conversion price the lessor
         of: $0.08 per share or 50% of the average of the lowest three trading
         prices during the 20 days preceding the conversion date. The debenture
         holders also received warrants to purchase 400,000 common shares at an
         exercise price of $0.036 per share at any time before December 28,
         2003. The estimated fair value of the warrants of $40,000 and the
         intrinsic value of the beneficial conversion feature of $127,500 have
         been allocated to paid-in capital. This resulting debt discount plus
         the $61,000 of financing charges was amortized on a straight-line basis
         over the term of the debentures. During September 2001 through November
         2001 the debentures in the amount of $200,000 were converted into
         5,241,754 shares of common stock. In addition, $30,374 of accrued
         interest related to the debentures was converted into 1,012,494 shares
         of common stock. On the conversion date, the unamortized portion of the
         debt discount and deferred financing costs related to the converted
         debt, in the amount of $41,756, was charged to interest expense.
















                                      F-14
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS



Note 6 - Equipment Loan
-----------------------
           During 2000, the Company entered into a $36,366 automobile loan,
           maturing in November 2005. The loan requires monthly installments of
           $620, including interest at .9%. The loan is collateralized by the
           automobile. Future maturities of the loan are as follows:

                               2002                                 $   7,211
                               2003                                     7,276
                               2004                                     7,342
                               2005                                     5,448
                               2006 and Thereafter                          -
                                                                    ---------
                                                                    $  27,277
                                                                    =========

Note 7 - Income Taxes:
----------------------
           At December 31, 2001, the Company had federal net operating loss
           carryforwards of approximately $11,124,000 to offset future federal
           taxable income expiring in various years through 2021. The Company
           also has state net operating loss carryforwards of approximately
           $621,500 to offset future state taxable income expiring in various
           years through 2021.

           The timing and extent in which the Company can utilize future tax
           deductions in any year may be limited by provisions of the Internal
           Revenue Code regarding changes in ownership of corporations due to
           certain ownership changes of the Company.

           The tax effects of temporary differences that give rise to
           significant portions of deferred tax assets and deferred tax
           liabilities at December 31, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>

                                                                                      2001              2000
                                                                                      ----              ----
                  <S>                                                             <C>               <C>
                  Deferred tax assets:
                      Net operating loss carryforwards                             $ 3,838,269      $ 3,453,113
                      Bad debt reserves                                                 37,810           43,519
                      Inventory reserves                                                 1,868              200
                      Accrued expenses                                                       -            1,755
                      Depreciation                                                      67,848                -
                                                                                   -----------      -----------
                  Total deferred tax assets                                          3,945,795        3,498,587

                  Deferred tax liabilities:
                      Software development                                                   -         (157,441)
                      Depreciation                                                           -          (22,914)
                                                                                   -----------      -----------
                  Total deferred tax asset                                           3,945,795        3,318,232
                  Valuation allowance                                               (3,945,795)      (3,318,232)
                                                                                   -----------      -----------
                  Net deferred tax asset                                           $         -      $         -
                                                                                   ===========      ===========
</TABLE>

Note 8 - Commitments and Contingencies:
---------------------------------------

          The Company is a defendant in a lawsuit filed by Accusoft
          Corporation. Accusoft Corporation is seeking the termination of
          certain license agreements and a preliminary injunction enjoining
          the Company from using the above licenses in the sales of their
          products. The ultimate outcome of this litigation cannot presently
          be determined. However, in management's opinion, the likelihood of a
          material adverse outcome is remote. Accordingly, adjustments, that
          might result from the resolution of this matter, if any, have not
          been reflected in the financial statements.







                                      F-15
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS



          The Company leases certain facilities, vehicles and office equipment
          under non-cancelable operating lease agreements that expire at various
          dates through 2005. Future minimum lease payments at December 31, 2001
          are as follows:

                               2002                              $  118,194
                               2003                                 118,194
                               2004                                 118,486
                               2005                                  56,462
                               2006 and thereafter                        -
                                                                 ----------
                                                                 $  411,336
                                                                 ==========

           Rental expense under such operating leases was approximately $104,100
           and $126,000 during the years ended December 31, 2001 and 2000,
           respectively.

Note 9 - 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. Under the Director Plan, each outside
           director is automatically granted an option to purchase 15,000 shares
           of common stock (first option) upon adoption of the Director Plan or
           the date such person becomes a director. Every year thereafter, each
           outside director is automatically granted an option to purchase 1,000
           shares (subsequent option) on each date of the annual meeting if a
           minimum of six months were served on the Board of Directors. 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.

           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, 1999              179,000       33,182           896,500        1,109,312       $.33-$3.81
Granted                                       843,000            -                 -          843,000              .10
Expired                                             -            -            (7,500)          (7,500)             .37
                                            --------------------------------------------------------------------------
Outstanding at December 31, 2000            1,022,000       33,812           889,000        1,944,812       $.10-$3.81
Granted                                             -            -                 -                -                -
Expired                                      (103,500)     ( 7,500)        ( 208,000)        (319,000)      $.10-$3.81
                                            --------------------------------------------------------------------------
Outstanding at December 31, 2001
    and June 30, 2002                         918,500       26,312           681,000        1,625,812       $.10-$3.81
    ------------------                      ==========================================================================
Exercisable options at
December 31, 2001
    and June 30, 2002                         918,500       26,312           681,000        1,625,812
    ------------------                      =========================================================

</TABLE>
           At December 31, 2001, the remaining contractual life of outstanding
           options was 8 years.




                                      F-16
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


Note 9 - Stock Option and Other Plans (Cont'd):
-----------------------------------------------

           Pro forma information regarding net loss and net loss per common
           share determined as if the Company accounted for stock options
           granted under the fair value method of SFAS 123 is as follows:
<TABLE>
<CAPTION>

                                                      December 31                            June 30
                                                 ---------------------                       --------
                                                 2001             2000                  2002          2001
                                                 ----             ----                  ----          ----
                  <S>                        <C>              <C>                    <C>            <C>
                  Net loss:                                                          (Unaudited)    (Unaudited)
                           As reported       $(2,982,510)     $(2,030,052)             $896,520     $1,303,638
                           Pro forma         $(2,993,559)     $(2,103,563)             $907,569     $1,266,832
                  Net loss per share:
                           As reported             $(.12)           $(.11)                $(.02)         $(.06)
                           Pro forma               $(.12)           $(.12)                $(.02)         $(.06)

</TABLE>

           The Company estimated the fair value of stock options at the date of
           grant by using a Black Scholes option pricing model with the
           following weighted-average assumptions for grants in 2000 as follows:
           risk-free interest rate of 5.5% for all years; expected life of the
           option of 5 years; no expected cash dividend payments on common
           stock, and volatility factors of the expected market price of the
           Company's common stock of: 1.033. The weighted average estimated fair
           value of stock options granted during 2000 was $.01. There were no
           options issued in 2001.

           The Black-Scholes option valuation model was developed for use in
           estimating the fair value of traded options which have no vesting
           restrictions and are fully transferable. As noted above, the
           Company's stock options are vested over an extended period. In
           addition, option models require the input of highly subjective
           assumptions including future stock price volatility. Because the
           Company's stock options have characteristics significantly different
           from those of traded options, and because changes in the subjective
           assumptions can materially affect the fair value estimates, in
           management's opinion, the Black-Scholes model does not necessarily
           provide a reliable measure of the fair value of the Company's stock
           options.

           During 1997, the Company adopted the Consultants and Advisors
           Compensation Plan (the Plan). Persons eligible under this Plan
           include any consultant or advisor of the Company who has provided
           bona fide services to the Company, except for services provided in
           connection with the offer or sale of securities in an equity
           transaction. The Company reserved 300,000 shares of common stock for
           issuance under this Plan of which 211,357 shares have been awarded
           through December 31, 2000. Awards may be granted in the form of stock
           options or stock grants. No awards shall be made after December 31,
           2001. The Company has not awarded any stock options or stock grants
           under this Plan since 1998.

Note 10 - Equity Transactions:
------------------------------
           During October 2001 through December 2001, the Company received
           $229,000 net of $11,000 of issuance costs, from the issuance of
           7,999,996 shares of common stock at $.03 per share via subscription
           agreements to various individuals.

           During 2001 and 2000, the Company issued 4,328,831 and 1,205,000
           shares, respectively, of restrictive common stock for services
           received. The Company recorded a charge for the issuance of such
           shares during 2001 and 2000 of $414,322 and $261,100, respectively,
           based on the fair market value of the Company's common stock on the
           date of the stock grant.




                                      F-17




<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


           In connection with the Company's initial public offering in 1995, the
           Company issued to each unit holder one Redeemable Class A Warrant and
           one Redeemable Class B Warrant. The Warrants were immediately
           detachable and separately transferable. Each Class A Warrant entitled
           the holder to purchase one share of common stock for $6.00 subject to
           adjustment, during the four-year period commencing one year from the
           date of the offering. Each Class B Warrant entitled the holder to
           purchase one share of common stock for $7.25 subject to adjustment,
           during the four-year period commencing one year from the date of the
           offering. The Class A and Class B Warrants are subject to redemption
           by the Company at any time, (within thirty days notice) at $.10 per
           warrant provided that the per share closing bid price of the common
           stock exceeds 175% of the exercise price for the Class A Warrant, and
           200% of the exercise price for the Class B Warrant, for at least 20
           consecutive trading days. During July 2000, the Company's Board of
           Directors reduced the exercise price of the Class A Warrants from
           $6.00 to $1.00, and reduced the exercise price of the Class B
           Warrants from $7.50 to $1.50. The expiration date for the Class A and
           Class B Warrants was extended from August 15, 2000 to August 15,
           2002. At December 31, 2001 and 2000, there were 1,483,750 Redeemable
           Class A Warrants outstanding and 1,483,750 Redeemable Class B
           Warrants outstanding.

           During July 1994, the Chairman excercised rights to purchase 119,999
           shares of Common Stock at $.001 per share in connection with an
           employment agreement. The Company recorded $120,000 in unearned
           compensation, based on the fair value of the restricted stock at the
           date of issuance. Such unearned compensation has amortized to expense
           in the statement of operations over the period of the employment
           agreement. Amortization expense of $-0- and $14,000 was recorded
           during the years ended December 31, 2001 and 2000, respectively.

           At December 31, 2001, the Company has the following common shares
           reserved for issuance:

           Common stock options available to grant                    4,255,188
           Common stock options outstanding                           1,625,812
           Common stock purchase rights                                 119,999
           Class A warrants outstanding                               1,483,750
           Class B warrants outstanding                               1,483,750
           Common stock available for grant:
                  Employee stock purchase plan                          100,000
                  Consultants and advisors compensation plan             88,643
           Convertible debentures                                    12,846,668
                                                                     ----------
                      Total                                          22,003,810
                                                                     ==========

Note 11 - Subsequent Events:
----------------------------

            On January 19, 2002 the Company received a letter from a shareholder
            threatening legal action pursuant to an October 2001 private
            placement offering. The letter from the shareholder alleged false
            and misleading statements were made by the Company in relation to
            convertible debenture funding and that the convertible debt was not
            properly approved by the board. The Company believes that the
            allegations are without merit. Currently no legal action has been
            filed, however, the Company intends to vigorously defend itself
            against such allegations if they are pursued.

           During January 2002, the Company issued 360,000 shares of restricted
           common stock for consulting services received. Such shares were
           valued at the fair market value on the date the shares were granted.

           During January 2002, the Company issued 1,500,000 shares of common
           stock in payment of $12,600 accrued interest on convertible
           debentures. During February 2002, the Company issued 703,828 shares
           of common stock in payment of $5,771 of accrued interest on
           convertible debentures.

           During February 2002, $14,000 of debentures were converted into
           2,456,140 shares of common stock.

           In April 2002, the Company entered into an agreement to extend the
           maturity date of the convertible debentures issued in March 2001 in
           the amount of $200,000 with a maturity date of March 4, 2002 for an
           additional year.


                                      F-18
<PAGE>

Note 12 - Subsequent Events (unaudited)
---------------------------------------
         During April through June 2002, $19,269 of the convertible debentures
         issued in March 2001 were converted into 5,090,912 shares of Common
         Stock.

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

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








                                      F-19


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>ex4-3.txt
<DESCRIPTION>EX4-3.TXT
<TEXT>
<PAGE>


                                                                     EXHIBIT 4.3




         THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A LETTER AGREEMENT DATED AS
         OF SEPTEMBER 30, 2002, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY
         BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN
         OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
         NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SUCH ACT.

                                                           Right to
                                                           Purchase
                                                           150,000
                                                           Shares of
                                                           Common
                                                           Stock, par
                                                           value $0.001
                                                           per share

                             STOCK PURCHASE WARRANT

        THIS CERTIFIES THAT, for value received, AJW Qualified Partners, LLC or
its registered assigns, is entitled to purchase form Digital Descriptor Systems,
Inc., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, One Hundred Fifty Thousand
(150,000) fully paid and nonassessable shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), at an exercise price per share
equal to $.01 (the "Exercise Price"). The term "Warrant Shares," as used herein,
refers to the shares of Common Stock purchasable hereunder. The Warrant Shares
and the Exercise Price are subject to adjustment as provided in Paragraph 4
hereof. The term "Warrants" means this Warrant and the other warrants issued
pursuant to that certain Letter Agreement, dated September 30, 2002, by and
among the Company and the Buyers listed on the execution page thereof (the
"Letter Agreement"), including any additional warrants issuable pursuant to
Section 4(l) thereof.

        This Warrant is subject to the following terms, provisions, and
conditions:

        1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at

<PAGE>

the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within three (3) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the "Penalty") equal
to 2% of the number of Warrant Shares that the Holder is entitled to multiplied
by the Market Price for each day that the Company fails to deliver certificates
for the Warrant Shares. For example, if the Holder is entitled to 100,000
Warrant Shares and the Market Price is $2.00, then the Company shall pay to the
Holder $4,000 for each day that the Company fails to deliver certificates for
the Warrant Shares. The Penalty shall be paid to the Holder by the fifth day of
the month following the month in which it has accrued.

        Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Debentures (as defined in the Letter
Agreement)) subject to a limitation on conversion or exercise analogous to the
limitation contained herein) and (ii) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portions thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) of the preceding
sentence. The holder of this Warrant may waive the limitations set forth herein
by sixty-one (61) days written notice to the Company. Notwithstanding anything
to the contrary contained herein, the limitation on exercise of this Warrant set
forth herein may not be amended without (i) the written consent of the holder
hereof and the Company and (ii) the approval of a majority of shareholders of
the Company.

                                      -2-

<PAGE>

        2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Letter Agreement and before 5:00 p.m., Los Angeles,
California time on the third (3rd) anniversary of the date of issuance (the
"Exercise Period").

        3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:

            (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.

            (b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

            (c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.

            (d) Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

            (e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.

                                      -3-

<PAGE>

        4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.

        In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.

            (a) Adjustment of Exercise Price and Number of Shares upon Issuance
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price (as hereinafter defined) on the date of issuance (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance, plus (y) the
quotient of the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance divided by the
Market Price in effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.

            (b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                (i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the Market Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.

                                      -4-

<PAGE>

                (ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.

                (iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

                (iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.

                (v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a

                                      -5-

<PAGE>

consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.

                (vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.

            (c) Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

            (d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

            (e) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be

                                      -6-

<PAGE>

issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.

            (f) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.

            (g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Financial Officer of the Company.

            (h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

            (i) No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

            (j) Other Notices. In case at any time:

                (i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;

                (ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                                      -7-

<PAGE>

                (iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another
corporation or entity; or

                (iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

            (k) Certain Events. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.

            (l) Certain Definitions.

                (i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.

                (ii) "Market Price," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the
Over-the-Counter Bulletin Board (the "OTC BB") for the five (5) Trading Days
immediately preceding such date as reported by Bloomberg Financial Markets, or
(ii) if the OTC BB is not the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg
Financial Markets, or (iii) if market value cannot be calculated as of such date
on any of the foregoing bases, the Market Price shall be the fair market value
as reasonably determined in good faith by (a) the Board of Directors of the

                                       -8-

<PAGE>

Company or, at the option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be made
hereunder.

                (iii) "Common Stock," for purposes of this Paragraph 4, includes
the Common Stock, par value $0.001 per share, and any additional class of stock
of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $0.001 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.

                (iv) "Trading Day" shall mean any day on which the Common Sock
is traded for any period on the OTCBB, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded.

        5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

        6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

        7. Transfer, Exchange, and Replacement of Warrant.

            (a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Letter Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Paragraph 8
are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of December 31, 2001, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").

                                      -9-

<PAGE>

            (b) Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

            (c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

            (d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

            (e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.

            (f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

        8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.

                                      -10-

<PAGE>

        9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 446 Lincoln Highway,
Fairless Hills, Pennsylvania 19030, Attention: Chief Executive Officer, or at
such other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.

        10. Governing Law. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

        11. Miscellaneous.

            (a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.

                                      -11-

<PAGE>

            (b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

            (c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For example, if the holder is exercising
100,000 Warrants with a per Warrant exercise price of $0.75 per share through a
cashless exercise when the Common Stock's current Market Price per share is
$2.00 per share, then upon such Cashless Exercise the holder will receive 62,500
shares of Common Stock.

            (d) Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

                                      -12-

<PAGE>


            IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.

                                       DIGITAL DESCRIPTOR SYSTEMS, INC.


                                       By: _____________________________
                                             Michael J. Pellegrino
                                             President & Chief Operating Officer


Dated as of  September 30, 2002



                                      -13-

<PAGE>



                           FORM OF EXERCISE AGREEMENT



                                                        Dated: ________ __, 200_



To:      Digital Descriptor Systems, Inc.





         The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:



                                          Name:_______________________________


                                          Signature:
                                          Address:____________________________
                                                  ____________________________


                                          Note:   The above signature should
                                                  correspond exactly with the
                                                  name on the face of the
                                                  within Warrant, if applicable.


and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.



<PAGE>



                               FORM OF ASSIGNMENT





         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:


Name of Assignee                    Address                    No of Shares
----------------                    -------                    ------------






, and hereby irrevocably constitutes and appoints ___________________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.



Dated:   ________ __, 200_



In the presence of:                       ______________________________

                                     Name:______________________________


                                     Signature:_________________________
                                     Title of Signing Officer or Agent (if any):
                                              ______________________________
                                     Address: ______________________________
                                              ______________________________


                                     Note: The above signature should
                                           correspond exactly with the name on
                                           the face of the within Warrant, if
                                           applicable.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>ex4-31.txt
<DESCRIPTION>EX4-3-1.TXT
<TEXT>
<PAGE>


                                                                   EXHIBIT 4.3.1




         THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A LETTER AGREEMENT DATED AS
         OF SEPTEMBER 30, 2002, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY
         BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN
         OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
         NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SUCH ACT.

                                                          Right to
                                                          Purchase
                                                          150,000
                                                          Shares of
                                                          Common
                                                          Stock, par
                                                          value $0.001
                                                          per share

                             STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, AJW Offshore, Ltd. or its
registered assigns, is entitled to purchase form Digital Descriptor Systems,
Inc., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, One Hundred Fifty Thousand
(150,000) fully paid and nonassessable shares of the Company's Common Stock, par
value $0.001 per share (the "Common Stock"), at an exercise price per share
equal to $.01 (the "Exercise Price"). The term "Warrant Shares," as used herein,
refers to the shares of Common Stock purchasable hereunder. The Warrant Shares
and the Exercise Price are subject to adjustment as provided in Paragraph 4
hereof. The term "Warrants" means this Warrant and the other warrants issued
pursuant to that certain Letter Agreement, dated September 30, 2002, by and
among the Company and the Buyers listed on the execution page thereof (the
"Letter Agreement"), including any additional warrants issuable pursuant to
Section 4(l) thereof.

         This Warrant is subject to the following terms, provisions, and
conditions:

        1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at

<PAGE>

the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within three (3) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the "Penalty") equal
to 2% of the number of Warrant Shares that the Holder is entitled to multiplied
by the Market Price for each day that the Company fails to deliver certificates
for the Warrant Shares. For example, if the Holder is entitled to 100,000
Warrant Shares and the Market Price is $2.00, then the Company shall pay to the
Holder $4,000 for each day that the Company fails to deliver certificates for
the Warrant Shares. The Penalty shall be paid to the Holder by the fifth day of
the month following the month in which it has accrued.

         Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Debentures (as defined in the Letter
Agreement)) subject to a limitation on conversion or exercise analogous to the
limitation contained herein) and (ii) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portions thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) of the preceding
sentence. The holder of this Warrant may waive the limitations set forth herein
by sixty-one (61) days written notice to the Company. Notwithstanding anything
to the contrary contained herein, the limitation on exercise of this Warrant set
forth herein may not be amended without (i) the written consent of the holder
hereof and the Company and (ii) the approval of a majority of shareholders of
the Company.

                                      -2-

<PAGE>

        2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Letter Agreement and before 5:00 p.m., Los Angeles,
California time on the third (3rd) anniversary of the date of issuance (the
"Exercise Period").

        3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:

            (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.

            (b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

            (c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.

            (d) Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

            (e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.

                                      -3-

<PAGE>

        4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.

         In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.

            (a) Adjustment of Exercise Price and Number of Shares upon Issuance
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price (as hereinafter defined) on the date of issuance (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance, plus (y) the
quotient of the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance divided by the
Market Price in effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.

            (b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                (i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the Market Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.

                                      -4-

<PAGE>

                (ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.

                (iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

                (iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.

                (v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of the

                                      -5-

<PAGE>

consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.

                (vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.

            (c) Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

            (d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

            (e) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the

                                      -6-

<PAGE>

exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.

            (f) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.

            (g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Financial Officer of the Company.

            (h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

            (i) No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

            (j) Other Notices. In case at any time:

                (i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;

                (ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                                      -7-

<PAGE>

                (iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another
corporation or entity; or

                (iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

            (k) Certain Events. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.

            (l) Certain Definitions.

                  (i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.

                  (ii) "Market Price," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the
Over-the-Counter Bulletin Board (the "OTC BB") for the five (5) Trading Days
immediately preceding such date as reported by Bloomberg Financial Markets, or
(ii) if the OTC BB is not the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg
Financial Markets, or (iii) if market value cannot be calculated as of such date
on any of the foregoing bases, the Market Price shall be the fair market value
as reasonably determined in good faith by (a) the Board of Directors of the


                                      -8-
<PAGE>

Company or, at the option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be made
hereunder.

                  (iii) "Common Stock," for purposes of this Paragraph 4,
includes the Common Stock, par value $0.001 per share, and any additional class
of stock of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $0.001 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.

                  (iv) "Trading Day" shall mean any day on which the Common Sock
is traded for any period on the OTCBB, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded.

         5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

         6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

         7. Transfer, Exchange, and Replacement of Warrant.

            (a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Letter Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Paragraph 8
are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of December 31, 2001, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").

                                      -9-
<PAGE>

            (b) Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

            (c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

            (d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

            (e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.

            (f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

         8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.

                                      -10-
<PAGE>

         9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 446 Lincoln Highway,
Fairless Hills, Pennsylvania 19030, Attention: Chief Executive Officer, or at
such other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.

         10. Governing Law. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

         11. Miscellaneous.

            (a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.

                                      -11-

<PAGE>

            (b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

            (c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For example, if the holder is exercising
100,000 Warrants with a per Warrant exercise price of $0.75 per share through a
cashless exercise when the Common Stock's current Market Price per share is
$2.00 per share, then upon such Cashless Exercise the holder will receive 62,500
shares of Common Stock.

            (d) Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.




                                      -12-

<PAGE>


         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.

                                      DIGITAL DESCRIPTOR SYSTEMS, INC.


                                      By:
                                          ----------------------------------
                                          Michael J. Pellegrino
                                          President & Chief Operating Officer


Dated as of  September 30, 2002









                                      -13-


<PAGE>




                           FORM OF EXERCISE AGREEMENT



                                                        Dated: ________ __, 200_



To:      Digital Descriptor Systems, Inc.





         The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:



                                    Name:
                                               -------------------------------

                                    Signature:
                                               -------------------------------

                                    Address:
                                                ------------------------------

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



                                    Note:   The above signature should
                                            correspond exactly with the name
                                            on the face of the within Warrant,
                                            if applicable.


and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.



<PAGE>


                               FORM OF ASSIGNMENT





         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:


Name of Assignee                  Address                      No of Shares
----------------                  -------                      ------------







, and hereby irrevocably constitutes and appoints____________________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the within-
named corporation, with full power of substitution in the premises.



Dated:   ________ __, 200_



In the presence of:                         ------------------------------

                                 Name:
                                            -------------------------------

                                 Signature:
                                            -------------------------------
                                 Title of Signing Officer or Agent (if any):


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

                                 Address:   ------------------------------

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


                                 Note: The above signature should correspond
                                       exactly with the name on the face of the
                                       within Warrant, if applicable.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5
<SEQUENCE>5
<FILENAME>exh51-1.txt
<DESCRIPTION>EX5-1-1.TXT
<TEXT>
<PAGE>


                                                                   Exhibit 5.1.1



October 10, 2002


Digital Descriptor Systems, Inc.
446 Lincoln Highway
Fairless Hills, PA 19030

Dear Sir or Madam:

         We have acted as counsel for Digital Descriptor Systems, Inc., a
Delaware corporation (the "Company"), in connection with its Registration
Statement on Form SB-2 and subsequent amendments, (the "Registration Statement")
being filed with the Securities and Exchange Commission relating to the
registration for resale of 62,184,841 shares of Common Stock, par value $ .001
per share, of which 51,931,634 are issuable upon conversion of convertible
debentures 10,253,207 are issuable upon the exchange of restricted shares.

            In connection with the foregoing, we have examined, among other
things, the Registration Statement and originals or copies, satisfactory to us,
of all such corporate records and of all such other agreements, certificates and
documents (including instruments evidencing or setting forth the terms and
provisions of the Convertible Securities) as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with the original
documents of documents submitted to us as copies. As to any facts material to
such opinion, we have, to the extent that relevant facts were not independently
established by us, relied on certificates of public officials and certificates,
oaths and declarations of officers or other representatives of the Company.

            Based on our examination mentioned above, we are of the opinion that
the securities being sold pursuant to the Registration Statement are duly
authorized and will be, when sold in the manner described in the Registration
Statement, legally and validly issued, and fully paid and non-assessable.

            We hereby consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to our firm under "Legal
Matters" in the related Prospectus.

            Very truly yours,

            /s/ Naccarato & Associates



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex10555.txt
<DESCRIPTION>EX10-5-5-1.TXT
<TEXT>
<PAGE>


                                                                  EXHIBIT 10.5.5





         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
         SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
         OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT
         REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SAID ACT.


                          SECURED CONVERTIBLE DEBENTURE

Fairless Hills, Pennsylvania
September 30, 2002                                                      $50,000

        FOR VALUE RECEIVED, DIGITAL DESCRIPTOR SYSTEMS, INC., a Delaware
corporation (hereinafter called the "Borrower"), hereby promises to pay to the
order of AJW Qualified Partners, LLC or its registered assigns (the "Holder")
the sum of Fifty Thousand Dollars ($50,000), on September 30, 2003 (the
"Maturity Date"), and to pay interest on the unpaid principal balance hereof at
the rate of twelve percent (12%) per annum from September 30, 2002 (the "Issue
Date") until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. Any amount of principal or interest
on this Debenture which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the same is paid
("Default Interest"). Interest shall commence accruing on the issue date, shall
be computed on the basis of a 365-day year and the actual number of days elapsed
and shall be payable, at the option of the Holder, either quarterly on March 31,
June 30, September 30 and December 31 of each year beginning on December 31,
2002, or at the time of conversion of the principal to which such interest
relates in accordance with Article I below. All payments due hereunder (to the
extent not converted into common stock, par value $0.001 per share, of the
Borrower (the "Common Stock") in accordance with the terms hereof) shall be made
in lawful money of the United States of America or, at the option of the Holder,
in whole or in part, in shares of Common Stock of the Borrower valued at the
then applicable Conversion Price (as defined herein). All payments shall be made
at such address as the Holder shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Debenture. Whenever any
amount expressed to be due by the terms of this Debenture is due on any day
which is not a business day, the same shall instead be due on the next
succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Debenture is paid in full, the



<PAGE>

extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this
Debenture, the term "business day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the city of Los Angeles, California
are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement, dated December
31, 2001, pursuant to which this Debenture was originally issued (the "Purchase
Agreement").

        This Debenture is free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights
or other similar rights of stockholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations of the Borrower
under this Debenture shall be secured by that certain Security Agreement dated
by and between the Borrower and the Holder of even date herewith.

        The following terms shall apply to this Debenture:


                          ARTICLE I. CONVERSION RIGHTS


        1.1 Conversion Right. The Holder shall have the right from time to time,
and at any time on or prior to the earlier of (i) the Maturity Date and (ii) the
date of payment of the Default Amount (as defined in Article III) pursuant to
Section 1.6(a) or Article III, the Optional Prepayment Amount (as defined in
Section 5.1 or any payments pursuant to Section 1.7, each in respect of the
remaining outstanding principal amount of this Debenture to convert all or any
part of the outstanding and unpaid principal amount of this Debenture into fully
paid and non-assessable shares of Common Stock, as such Common Stock exists on
the Issue Date, or any shares of capital stock or other securities of the
Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the "Conversion Price") determined as provided herein
(a "Conversion"); provided, however, that in no event shall the Holder be
entitled to convert any portion of this Debenture in excess of that portion of
this Debenture upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debentures or the unexercised or
unconverted portion of any other security of the Borrower (including, without
limitation, the warrants issued by the Borrower pursuant to the Purchase
Agreement) subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Debenture with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The Holder of this Debenture may waive the
limitations set forth herein by sixty-one (61) days written notice to the
Company. The number of shares of Common Stock to be issued upon each conversion
of this Debenture shall be determined by dividing the Conversion Amount (as

                                       2

<PAGE>

defined below) by the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto as Exhibit A
(the "Notice of Conversion"), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted by facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Borrower before 3:00 p.m., Los Angeles, California
time on such conversion date (the "Conversion Date"). The term "Conversion
Amount" means, with respect to any conversion of this Debenture, the sum of (1)
the principal amount of this Debenture to be converted in such conversion plus
(2) accrued and unpaid interest, if any, on such principal amount at the
interest rates provided in this Debenture to the Conversion Date plus (3)
Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to
Section 2(c) of that certain Registration Rights Agreement, dated as of December
31, 2001, executed in connection with the initial issuance of this Debenture and
the other Debentures issued on the Issue Date (the "Registration Rights
Agreement").

        1.2 Conversion Price.

            (a) Calculation of Conversion Price. The Conversion Price shall be
the lesser of (i) the Variable Conversion Price (as defined herein) and (ii) the
Fixed Conversion Price (as defined herein) (subject, in each case, to equitable
adjustments for stock splits, stock dividends or rights offerings by the
Borrower relating to the Borrower's securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The "Variable Conversion Price"
shall mean the Applicable Percentage (as defined herein) multiplied by the
Market Price (as defined herein). "Market Price" means the average of the lowest
three (3) Trading Prices (as defined below) for the Common Stock during the
twenty (20) Trading Day period ending one Trading Day prior to the date the
Conversion Notice is sent by the Holder to the Borrower via facsimile (the
"Conversion Date"). "Trading Price" means, for any security as of any date, the
intraday trading price on the Over-the-Counter Bulletin Board (the "OTCBB") as
reported by a reliable reporting service mutually acceptable to and hereafter
designated by Holders of a majority in interest of the Debentures and the
Borrower or, if the OTCBB is not the principal trading market for such security,
the intraday trading price of such security on the principal securities exchange
or trading market where such security is listed or traded or, if no intraday
trading price of such security is available in any of the foregoing manners, the
average of the intraday trading prices of any market makers for such security
that are listed in the "pink sheets" by the National Quotation Bureau, Inc. If
the Trading Price cannot be calculated for such security on such date in the
manner provided above, the Trading Price shall be the fair market value as
mutually determined by the Borrower and the holders of a majority in interest of
the Debentures being converted for which the calculation of the Trading Price is
required in order to determine the Conversion Price of such Debentures. "Trading
Day" shall mean any day on which the Common Stock is traded for any period on
the OTCBB, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded. "Applicable Percentage" shall mean
50.0%. The "Fixed Conversion Price" shall mean $.005.

                                       3

<PAGE>

            (b) Conversion Price During Major Announcements. Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving or
continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group
or entity (including the Borrower) publicly announces a tender offer to purchase
50% or more of the Borrower's Common Stock (or any other takeover scheme) (the
date of the announcement referred to in clause (i) or (ii) is hereinafter
referred to as the "Announcement Date"), then the Conversion Price shall,
effective upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to the lower of
(x) the Conversion Price which would have been applicable for a Conversion
occurring on the Announcement Date and (y) the Conversion Price that would
otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date, the Conversion Price shall be determined as set forth in this Section
1.2(a). For purposes hereof, "Adjusted Conversion Price Termination Date" shall
mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section 1.2(b)
has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section
1.2(b) to become operative.

        1.3 Authorized Shares. The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Debenture and the other Debentures issued pursuant to the Purchase
Agreement. The Borrower is required at all times to have authorized and reserved
two times the number of shares that is actually issuable upon full conversion of
the Debentures (based on the Conversion Price of the Debentures or the Exercise
Price of the Warrants in effect from time to time) (the "Reserved Amount"). The
Reserved Amount shall be increased from time to time in accordance with the
Borrower's obligations pursuant to Section 4(h) of the Purchase Agreement. The
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. In addition, if the Borrower shall issue
any securities or make any change to its capital structure which would change
the number of shares of Common Stock into which the Debentures shall be
convertible at the then current Conversion Price, the Borrower shall at the same
time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Debentures. The Borrower (i) acknowledges that
it has irrevocably instructed its transfer agent to issue certificates for the
Common Stock issuable upon conversion of this Debenture, and (ii) agrees that
its issuance of this Debenture shall constitute full authority to its officers
and agents who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Debenture.

        If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article I (a "Conversion Default"), subject to Section

                                       4

<PAGE>

4.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this
Debenture which the Holder included in its Conversion Notice and which exceeds
the amount which is then convertible into available shares of Common Stock (the
"Excess Amount") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date additional shares
of Common Stock are authorized by the Borrower to permit such conversion, at
which time the Conversion Price in respect thereof shall be the lesser of (i)
the Conversion Price on the Conversion Default Date (as defined below) and (ii)
the Conversion Price on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Borrower shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Debenture plus (2)
accrued and unpaid interest on the unpaid principal amount of this Debenture
through the Authorization Date (as defined below) plus (3) Default Interest, if
any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
..24, multiplied by (z) (N/365), where N = the number of days from the day the
holder submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date") to the date (the "Authorization Date") that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Debenture. The
Borrower shall use its best efforts to authorize a sufficient number of shares
of Common Stock as soon as practicable following the earlier of (i) such time
that the Holder notifies the Borrower or that the Borrower otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof and (ii) a Conversion Default. The
Borrower shall send notice to the Holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default Payments for
each calendar month shall be paid in cash or shall be convertible into Common
Stock (at such time as there are sufficient authorized shares of Common Stock)
at the applicable Conversion Price, at the Holder's option, as follows:

            (a) In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) day of the month following
the month in which it has accrued; and

            (b) In the event Holder elects to take such payment in Common Stock,
the Holder may convert such payment amount into Common Stock at the Conversion
Price (as in effect at the time of conversion) at any time after the fifth day
of the month following the month in which it has accrued in accordance with the
terms of this Article I (so long as there is then a sufficient number of
authorized shares of Common Stock).

        The Holder's election shall be made in writing to the Borrower at any
time prior to 6:00 p.m., Los Angeles time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Borrower's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).

                                       5

<PAGE>

        1.4 Method of Conversion.

            (a) Mechanics of Conversion. Subject to Section 1.1, this Debenture
may be converted by the Holder in whole or in part at any time from time to time
after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion
(by facsimile or other reasonable means of communication dispatched on the
Conversion Date prior to 3:00 p.m., Los Angeles, California time) and (B)
subject to Section 1.4(b), surrendering this Debenture at the principal office
of the Borrower.

            (b) Surrender of Debenture Upon Conversion. Notwithstanding anything
to the contrary set forth herein, upon conversion of this Debenture in
accordance with the terms hereof, the Holder shall not be required to physically
surrender this Debenture to the Borrower unless the entire unpaid principal
amount of this Debenture is so converted. The Holder and the Borrower shall
maintain records showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of this
Debenture upon each such conversion. In the event of any dispute or discrepancy,
such records of the Borrower shall be controlling and determinative in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this
Debenture is converted as aforesaid, the Holder may not transfer this Debenture
unless the Holder first physically surrenders this Debenture to the Borrower,
whereupon the Borrower will forthwith issue and deliver upon the order of the
Holder a new Debenture of like tenor, registered as the Holder (upon payment by
the Holder of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid principal amount of this Debenture. The Holder
and any assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture
represented by this Debenture may be less than the amount stated on the face
hereof.

            (c) Payment of Taxes. The Borrower shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property on conversion
of this Debenture in a name other than that of the Holder (or in street name),
and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than
the Holder or the custodian in whose street name such shares are to be held for
the Holder's account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

            (d) Delivery of Common Stock Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile transmission (or other reasonable means
of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 1.4, the Borrower shall issue and deliver
or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within two (2)
business days after such receipt (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Debenture) (such second
business day being hereinafter referred to as the "Deadline") in accordance with

                                       6

<PAGE>

the terms hereof and the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g) of the Purchase Agreement that
certificates for shares of Common Stock issued on or after the effective date of
the Registration Statement upon conversion of this Debenture shall not bear any
restrictive legend).

            (e) Obligation of Borrower to Deliver Common Stock. Upon receipt by
the Borrower of a Notice of Conversion, the Holder shall be deemed to be the
holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on
this Debenture shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this Debenture being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash
or other assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the Borrower's obligation
to issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Borrower to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder of any
obligation to the Borrower, and irrespective of any other circumstance which
might otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in the Notice of
Conversion shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 3:00 p.m., Los Angeles, California time, on such
date.

            (f) Delivery of Common Stock by Electronic Transfer. In lieu of
delivering physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.

            (g) Failure to Deliver Common Stock Prior to Deadline. Without in
any way limiting the Holder's right to pursue other remedies, including actual
damages and/or equitable relief, the parties agree that if delivery of the
Common Stock issuable upon conversion of this Debenture is more than two (2)
days after the Deadline (other than a failure due to the circumstances described
in Section 1.3 above, which failure shall be governed by such Section) the
Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock. Such cash amount
shall be paid to Holder by the fifth day of the month following the month in
which it has accrued or, at the option of the Holder (by written notice to the
Borrower by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Debenture, in which
event interest shall accrue thereon in accordance with the terms of this
Debenture and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Debenture.

                                       7

<PAGE>

        1.5 Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Debenture may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor rule) ("Rule 144") or (iv)
such shares are transferred to an "affiliate" (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Debenture have been
registered under the Act as contemplated by the Registration Rights Agreement or
otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
each certificate for shares of Common Stock issuable upon conversion of this
Debenture that has not been so included in an effective registration statement
or that has not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend substantially
in the following form, as appropriate:

        "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE
        SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION
        OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
        COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
        UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER
        SAID ACT."

        The legend set forth above shall be removed and the Borrower shall issue
to the Holder a new certificate therefor free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act and the shares are so sold or
transferred, (ii) such Holder provides the Borrower or its transfer agent with
reasonable assurances that the Common Stock issuable upon conversion of this
Debenture (to the extent such securities are deemed to have been acquired on the
same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common
Stock issuable upon conversion of this Debenture, such security is registered
for sale by the Holder under an effective registration statement filed under the
Act or otherwise may be sold pursuant to Rule 144 without any restriction as to
the number of securities as of a particular date that can then be immediately
sold. Nothing in this Debenture shall (i) limit the Borrower's obligation under
the Registration Rights Agreement or (ii) affect in any way the Holder's
obligations to comply with applicable prospectus delivery requirements upon the
resale of the securities referred to herein.

                                       8

<PAGE>

        1.6 Effect of Certain Events.

            (a) Effect of Merger, Consolidation, Etc. At the option of the
Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as defined below) or
Persons when the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. "Person"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

            (b) Adjustment Due to Merger, Consolidation, Etc. If, at any time
when this Debenture is issued and outstanding and prior to conversion of all of
the Debentures, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Debenture
shall thereafter have the right to receive upon conversion of this Debenture,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder of this Debenture
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debenture) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter deliverable upon
the conversion hereof. The Borrower shall not effect any transaction described
in this Section 1.6(b) unless (a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special meeting of
stockholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Debenture) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written
instrument the obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.

                                       9

<PAGE>

            (c) Adjustment Due to Distribution. If the Borrower shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "Distribution"), then the Holder of this Debenture shall
be entitled, upon any conversion of this Debenture after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.

            (d) Adjustment Due to Dilutive Issuance. If, at any time when any
Debentures are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common Stock (a "Dilutive Issuance"), then immediately upon the Dilutive
Issuance, the Fixed Conversion Price will be reduced to the amount of the
consideration per share received by the Borrower in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.

            The Borrower shall be deemed to have issued or sold shares of Common
Stock if the Borrower in any manner issues or grants any warrants, rights or
options, whether or not immediately exercisable, to subscribe for or to purchase
Common Stock or other securities convertible into or exchangeable for Common
Stock ("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as "Options")
and the price per share for which Common Stock is issuable upon the exercise of
such Options is less than the Fixed Conversion Price then in effect, then the
Fixed Conversion Price shall be equal to such price per share. For purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon the exercise of such Options" is determined by dividing (i) the total
amount, if any, received or receivable by the Borrower as consideration for the
issuance or granting of all such Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Borrower upon the exercise of
all such Options, plus, in the case of Convertible Securities issuable upon the
exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon exercise of
such Options.

            Additionally, the Borrower shall be deemed to have issued or sold
shares of Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options), and the price per share for

                                       10

<PAGE>

which Common Stock is issuable upon such conversion or exchange is less than the
Fixed Conversion Price then in effect, then the Fixed Conversion Price shall be
equal to such price per share. For the purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon such conversion or
exchange" is determined by dividing (i) the total amount, if any, received or
receivable by the Borrower as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Fixed Conversion Price will be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.

            (e) Purchase Rights. If, at any time when any Debentures are issued
and outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the "Purchase Rights")
pro rata to the record holders of any class of Common Stock, then the Holder of
this Debenture will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Debenture (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

            (f) Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Borrower
shall, upon the written request at any time of the Holder, furnish to such
Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Debenture.

        1.7 Trading Market Limitations. Unless permitted by the applicable rules
and regulations of the principal securities market on which the Common Stock is
then listed or traded, in no event shall the Borrower issue upon conversion of
or otherwise pursuant to this Debenture and the other Debentures issued pursuant
to the Purchase Agreement more than the maximum number of shares of Common Stock
that the Borrower can issue pursuant to any rule of the principal United States
securities market on which the Common Stock is then traded (the "Maximum Share
Amount"), which shall be 19.99% of the total shares outstanding on the Issue
Date, subject to equitable adjustment from time to time for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring after the date hereof. Once the Maximum Share Amount
has been issued (the date of which is hereinafter referred to as the "Maximum

                                       11

<PAGE>

Conversion Date"), if the Borrower fails to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Borrower or any of its securities on the Borrower's ability to issue shares
of Common Stock in excess of the Maximum Share Amount (a "Trading Market
Prepayment Event"), in lieu of any further right to convert this Debenture, and
in full satisfaction of the Borrower's obligations under this Debenture, the
Borrower shall pay to the Holder, within fifteen (15) business days of the
Maximum Conversion Date (the "Trading Market Prepayment Date"), an amount equal
to 130% times the sum of (a) the then outstanding principal amount of this
Debenture immediately following the Maximum Conversion Date, plus (b) accrued
and unpaid interest on the unpaid principal amount of this Debenture to the
Trading Market Prepayment Date, plus (c) Default Interest, if any, on the
amounts referred to in clause (a) and/or (b) above, plus (d) any optional
amounts that may be added thereto at the Maximum Conversion Date by the Holder
in accordance with the terms hereof (the then outstanding principal amount of
this Debenture immediately following the Maximum Conversion Date, plus the
amounts referred to in clauses (b), (c) and (d) above shall collectively be
referred to as the "Remaining Convertible Amount"). With respect to each Holder
of Debentures, the Maximum Share Amount shall refer to such Holder's pro rata
share thereof determined in accordance with Section 4.8 below. In the event that
the sum of (x) the aggregate number of shares of Common Stock issued upon
conversion of this Debenture and the other Debentures issued pursuant to the
Purchase Agreement plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of this Debenture and the other Debentures
issued pursuant to the Purchase Agreement, represents at least one hundred
percent (100%) of the Maximum Share Amount (the "Triggering Event"), the
Borrower will use its best efforts to seek and obtain Stockholder Approval (or
obtain such other relief as will allow conversions hereunder in excess of the
Maximum Share Amount) as soon as practicable following the Triggering Event and
before the Maximum Conversion Date. As used herein, "Stockholder Approval" means
approval by the stockholders of the Borrower to authorize the issuance of the
full number of shares of Common Stock which would be issuable upon full
conversion of the then outstanding Debentures but for the Maximum Share Amount.

        1.8 Status as Stockholder. Upon submission of a Notice of Conversion by
a Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Holder's allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Holder's rights as a Holder
of such converted portion of this Debenture shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Borrower to comply with the terms of this
Debenture. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Debenture for any reason, then (unless the Holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this Debenture with
respect to such unconverted portions of this Debenture and the Borrower shall,
as soon as practicable, return such unconverted Debenture to the Holder or, if
the Debenture has not been surrendered, adjust its records to reflect that such

                                       12

<PAGE>

portion of this Debenture has not been converted. In all cases, the Holder shall
retain all of its rights and remedies (including, without limitation, (i) the
right to receive Conversion Default Payments pursuant to Section 1.3 to the
extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Section 1.3) for the
Borrower's failure to convert this Debenture.


                          ARTICLE II. CERTAIN COVENANTS

        2.1 Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Debenture, the Borrower shall not without the Holder's
written consent (a) pay, declare or set apart for such payment, any dividend or
other distribution (whether in cash, property or other securities) on shares of
capital stock other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock or (b) directly or indirectly or through
any subsidiary make any other payment or distribution in respect of its capital
stock except for distributions pursuant to any shareholders' rights plan which
is approved by a majority of the Borrower's disinterested directors.

        2.2 Restriction on Stock Repurchases. So long as the Borrower shall have
any obligation under this Debenture, the Borrower shall not without the Holder's
written consent redeem, repurchase or otherwise acquire (whether for cash or in
exchange for property or other securities or otherwise) in any one transaction
or series of related transactions any shares of capital stock of the Borrower or
any warrants, rights or options to purchase or acquire any such shares.

        2.3 Borrowings. So long as the Borrower shall have any obligation under
this Debenture, the Borrower shall not, without the Holder's written consent,
create, incur, assume or suffer to exist any liability for borrowed money,
except (a) borrowings in existence or committed on the date hereof and of which
the Borrower has informed Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business or (c) borrowings, the proceeds of which shall be
used to repay this Debenture.

        2.4 Sale of Assets. So long as the Borrower shall have any obligation
under this Debenture, the Borrower shall not, without the Holder's written
consent, sell, lease or otherwise dispose of any significant portion of its
assets outside the ordinary course of business. Any consent to the disposition
of any assets may be conditioned on a specified use of the proceeds of
disposition.

        2.5 Advances and Loans. So long as the Borrower shall have any
obligation under this Debenture, the Borrower shall not, without the Holder's
written consent, lend money, give credit or make advances to any person, firm,
joint venture or corporation, including, without limitation, officers,
directors, employees, subsidiaries and affiliates of the Borrower, except loans,
credits or advances (a) in existence or committed on the date hereof and which
the Borrower has informed Holder in writing prior to the date hereof, (b) made
in the ordinary course of business or (c) not in excess of $50,000.

                                       13

<PAGE>

        2.6 Contingent Liabilities. So long as the Borrower shall have any
obligation under this Debenture, the Borrower shall not, without the Holder's
written consent, assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection and except assumptions, guarantees,
endorsements and contingencies (a) in existence or committed on the date hereof
and which the Borrower has informed Holder in writing prior to the date hereof,
and (b) similar transactions in the ordinary course of business.


                         ARTICLE III. EVENTS OF DEFAULT

        If any of the following events of default (each, an "Event of Default")
shall occur:

        3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Debenture, whether at
maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7, upon
acceleration or otherwise.

        3.2 Conversion and the Shares. The Borrower fails to issue shares of
Common Stock or Investment Options to the Holder (or announces or threatens that
it will not honor its obligation to do so) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Debenture
(for a period of at least sixty (60) days, if such failure is solely as a result
of the circumstances governed by Section 1.3 and the Borrower is using its best
efforts to authorize a sufficient number of shares of Common Stock as soon as
practicable), fails to transfer or cause its transfer agent to transfer
(electronically or in certificated form) any certificate for shares of Common
Stock issued to the Holder upon conversion of or otherwise pursuant to this
Debenture as and when required by this Debenture or the Registration Rights
Agreement, or fails to remove any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Debenture as and when required by this Debenture or the Registration Rights
Agreement (or makes any announcement, statement or threat that it does not
intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for ten (10) days after
the Borrower shall have been notified thereof in writing by the Holder.

        3.3 Failure to Timely File Registration or Effect Registration. The
Borrower fails to file the Registration Statement within fifteen (15) days
following the Issue Date or obtain effectiveness with the Securities and
Exchange Commission of the Registration Statement within sixty (60) days
following the Issue Date or such Registration Statement lapses in effect (or
sales cannot otherwise be made thereunder effective, whether by reason of the
Borrower's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement or otherwise) for more than
thirty (30) consecutive days or sixty (60) days in any twelve month period after
the Registration Statement becomes effective;

                                       14

<PAGE>

        3.4 Breach of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in Sections 1.3, 1.6 or 1.7 of this
Debenture, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement and such breach continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;

        3.5 Breach of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Purchase Agreement and the Registration
Rights Agreement), shall be false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to this
Debenture, the Purchase Agreement or the Registration Rights Agreement;

        3.6 Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business, or such a receiver or trustee shall otherwise be
appointed;

        3.7 Judgments. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;

        3.8 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower or any subsidiary of the Borrower; or

        3.9 Delisting of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, the Nasdaq National
Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American
Stock Exchange;

        3.10 Default Under Other Debentures. An Event of Default has occurred
and is continuing under any of the other Debentures issued pursuant to the
Purchase Agreement.

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of the Holders of a majority of the aggregate principal amount of the
outstanding Debentures issued pursuant to the Purchase Agreement exercisable
through the delivery of written notice to the Borrower by such Holders (the
"Default Notice"), and upon the occurrence of an Event of Default specified in
Section 3.6 or 3.8, the Debentures shall become immediately due and payable and
the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the greater of (i) 130% times the sum of (w) the
then outstanding principal amount of this Debenture plus (x) accrued and unpaid
interest on the unpaid principal amount of this Debenture to the date of payment
(the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the

                                       15

<PAGE>

amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of
the Registration Rights Agreement (the then outstanding principal amount of this
Debenture to the date of payment plus the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the "Default Sum") or (ii) the
"parity value" of the Default Sum to be prepaid, where parity value means (a)
the highest number of shares of Common Stock issuable upon conversion of or
otherwise pursuant to such Default Sum in accordance with Article I, treating
the Trading Day immediately preceding the Mandatory Prepayment Date as the
"Conversion Date" for purposes of determining the lowest applicable Conversion
Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the highest Closing Price for the Common
Stock during the period beginning on the date of first occurrence of the Event
of Default and ending one day prior to the Mandatory Prepayment Date (the
"Default Amount") and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity. If the Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default
(and so long and to the extent that there are sufficient authorized shares), to
require the Borrower, upon written notice, to immediately issue, in lieu of the
Default Amount, the number of shares of Common Stock of the Borrower equal to
the Default Amount divided by the Conversion Price then in effect.


                            ARTICLE IV. MISCELLANEOUS

        4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

        4.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be 446 Lincoln
Highway, Fairless Hills, Pennsylvania 19030, facsimile number: 267-580-1090).
Both the Holder and the Borrower may change the address for service by service
of written notice to the other as herein provided.

        4.3 Amendments. This Debenture and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the Holder. The
term "Debenture" and all reference thereto, as used throughout this instrument,
shall mean this instrument (and the other Debentures issued pursuant to the
Purchase Agreement) as originally executed, or if later amended or supplemented,
then as so amended or supplemented.

                                       16

<PAGE>

        4.4 Assignability. This Debenture shall be binding upon the Borrower and
its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Debenture must be an
"accredited investor" (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Debenture to the contrary, this Debenture may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.

        4.5 Cost of Collection. If default is made in the payment of this
Debenture, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.

        4.6 Governing Law. THIS DEBENTURE SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS DEBENTURE, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS DEBENTURE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

        4.7 Certain Amounts. Whenever pursuant to this Debenture the Borrower is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Debenture may be difficult to determine and the amount to be so paid by the
Borrower represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this
Debenture and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Debenture at a price in excess of the price paid for
such shares pursuant to this Debenture. The Borrower and the Holder hereby agree
that such amount of stipulated damages is not plainly disproportionate to the
possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Debenture into shares of Common Stock.

                                       17

<PAGE>

        4.8 Allocations of Maximum Share Amount and Reserved Amount. The Maximum
Share Amount and Reserved Amount shall be allocated pro rata among the Holders
of Debentures based on the principal amount of such Debentures issued to each
Holder. Each increase to the Maximum Share Amount and Reserved Amount shall be
allocated pro rata among the Holders of Debentures based on the principal amount
of such Debentures held by each Holder at the time of the increase in the
Maximum Share Amount or Reserved Amount. In the event a Holder shall sell or
otherwise transfer any of such Holder's Debentures, each transferee shall be
allocated a pro rata portion of such transferor's Maximum Share Amount and
Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount
which remains allocated to any person or entity which does not hold any
Debentures shall be allocated to the remaining Holders of Debentures, pro rata
based on the principal amount of such Debentures then held by such Holders.

        4.9 Damages Shares. The shares of Common Stock that may be issuable to
the Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section
2(c) of the Registration Rights Agreement ("Damages Shares") shall be treated as
Common Stock issuable upon conversion of this Debenture for all purposes hereof
and shall be subject to all of the limitations and afforded all of the rights of
the other shares of Common Stock issuable hereunder, including without
limitation, the right to be included in the Registration Statement filed
pursuant to the Registration Rights Agreement. For purposes of calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein, amounts convertible into Damages Shares ("Damages Amounts")
shall not bear interest but must be converted prior to the conversion of any
outstanding principal amount hereof, until the outstanding Damages Amounts is
zero.

        4.10 Denominations. At the request of the Holder, upon surrender of this
Debenture, the Borrower shall promptly issue new Debentures in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $50,000 as the Holder shall request.

        4.11 Purchase Agreement. By its acceptance of this Debenture, each
Holder agrees to be bound by the applicable terms of the Purchase Agreement.

        4.12 Notice of Corporate Events. Except as otherwise provided below, the
Holder of this Debenture shall have no rights as a Holder of Common Stock unless
and only to the extent that it converts this Debenture into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of the
Borrower's shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of

                                       18

<PAGE>

determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event
requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section
4.12.

        4.13 Remedies. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Borrower acknowledges that the remedy at law for a breach of its obligations
under this Debenture will be inadequate and agrees, in the event of a breach or
threatened breach by the Borrower of the provisions of this Debenture, that the
Holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Debenture
and to enforce specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other security being
required.


                         ARTICLE V. OPTIONAL PREPAYMENT

        5.1. Optional Prepayment. Notwithstanding anything to the contrary
contained in this Article V, for not more than thirty (30) days from the date
hereof, so long as (i) no Event of Default or Trading Market Prepayment Event
shall have occurred and be continuing, and (ii) the Borrower has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of the Debentures, then at any time after the Issue Date, the
Borrower shall have the right, exercisable on not less than ten (10) Trading
Days prior written notice to the Holders of the Debentures (which notice may not
be sent to the Holders of the Debentures until the Borrower is permitted to
prepay the Debentures pursuant to this Section 5.1), to prepay all of the
outstanding Debentures in accordance with this Section 5.1. Any notice of
prepayment hereunder (an "Optional Prepayment") shall be delivered to the
Holders of the Debentures at their registered addresses appearing on the books
and records of the Borrower and shall state (1) that the Borrower is exercising
its right to prepay all of the Debentures issued on the Issue Date and (2) the
date of prepayment (the "Optional Prepayment Notice"). On the date fixed for
prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of
the Optional Prepayment Amount (as defined below) to or upon the order of the
Holders as specified by the Holders in writing to the Borrower at least one (1)
business day prior to the Optional Prepayment Date. If the Borrower exercises
its right to prepay the Debentures, the Borrower shall make payment to the
holders of an amount in cash (the "Optional Prepayment Amount") equal to 130%
multiplied by the sum of (w) the then outstanding principal amount of this
Debenture plus (x) accrued and unpaid interest on the unpaid principal amount of

                                       19

<PAGE>

this Debenture to the Optional Prepayment Date plus (y) Default Interest, if
any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section
2(c) of the Registration Rights Agreement (the then outstanding principal amount
of this Debenture to the date of payment plus the amounts referred to in clauses
(x), (y) and (z) shall collectively be known as the "Optional Prepayment Sum").
Notwithstanding notice of an Optional Prepayment, the Holders shall at all times
prior to the Optional Prepayment Date maintain the right to convert all or any
portion of the Debentures in accordance with Article I and any portion of
Debentures so converted after receipt of an Optional Prepayment Notice and prior
to the Optional Prepayment Date set forth in such notice and payment of the
aggregate Optional Prepayment Amount shall be deducted from the principal amount
of Debentures which are otherwise subject to prepayment pursuant to such notice.
If the Borrower delivers an Optional Prepayment Notice and fails to pay the
Optional Prepayment Amount due to the Holders of the Debentures within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to redeem the Debentures pursuant to this Section 5.1.











                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




                                       20

<PAGE>


          IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed in its name by its duly authorized officer this 30th day of September,
2002.


                                    DIGITAL DESCRIPTOR SYSTEMS, INC.



                                    By:      ______________________________
                                             Michael J. Pellegrino
                                             President & Chief Operating Officer





















                                       21


<PAGE>


                                                                       EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                       in order to Convert the Debentures)

        The undersigned hereby irrevocably elects to convert $________principal
amount of the Debenture (defined below) into shares of common stock, par value
$0.001 per share ("Common Stock"), of Digital Descriptor Systems, Inc., a
Delaware corporation (the "Borrower") according to the conditions of the
convertible debentures of the Borrower dated as of September 30, 2002 (the
"Debentures"), as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any. A copy of each Debenture is attached hereto (or
evidence of loss, theft or destruction thereof).

        The Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ( "DWAC
Transfer").

        Name of DTC Prime Broker:________________________________________
        Account Number:__________________________________________________

        In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby requests
that the Borrower issue a certificate or certificates for the number of shares
of Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

         Name:___________________________________________________________
         Address:________________________________________________________

        The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Debentures shall be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from
registration under the Act.

                  Date of Conversion:___________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to
                  Conversion of the Debentures:______________
                  Signature:___________________________________
                  Name:______________________________________
                  Address:____________________________________

The Borrower shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Debenture(s) to be converted, and shall make payments pursuant to the Debentures
for the number of business days such issuance and delivery is late.

                                      A-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>ex10555-1.txt
<DESCRIPTION>EX10555-1.TXT
<TEXT>
<PAGE>

                                                                EXHIBIT 10.5.5.1





         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
         SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
         OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT
         REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SAID ACT.


                          SECURED CONVERTIBLE DEBENTURE

Fairless Hills, Pennsylvania
September 30, 2002                                                       $50,000

        FOR VALUE RECEIVED, DIGITAL DESCRIPTOR SYSTEMS, INC., a Delaware
corporation (hereinafter called the "Borrower"), hereby promises to pay to the
order of AJW Offshore, Ltd. or its registered assigns (the "Holder") the sum of
Fifty Thousand Dollars ($50,000), on September 30, 2003 (the "Maturity Date"),
and to pay interest on the unpaid principal balance hereof at the rate of twelve
percent (12%) per annum from September 30, 2002 (the "Issue Date") until the
same becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise. Any amount of principal or interest on this Debenture
which is not paid when due shall bear interest at the rate of fifteen percent
(15%) per annum from the due date thereof until the same is paid ("Default
Interest"). Interest shall commence accruing on the issue date, shall be
computed on the basis of a 365-day year and the actual number of days elapsed
and shall be payable, at the option of the Holder, either quarterly on March 31,
June 30, September 30 and December 31 of each year beginning on December 31,
2002, or at the time of conversion of the principal to which such interest
relates in accordance with Article I below. All payments due hereunder (to the
extent not converted into common stock, par value $0.001 per share, of the
Borrower (the "Common Stock") in accordance with the terms hereof) shall be made
in lawful money of the United States of America or, at the option of the Holder,
in whole or in part, in shares of Common Stock of the Borrower valued at the
then applicable Conversion Price (as defined herein). All payments shall be made
at such address as the Holder shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Debenture. Whenever any
amount expressed to be due by the terms of this Debenture is due on any day
which is not a business day, the same shall instead be due on the next
succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Debenture is paid in full, the



<PAGE>

extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this
Debenture, the term "business day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the city of Los Angeles, California
are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement, dated December
31, 2001, pursuant to which this Debenture was originally issued (the "Purchase
Agreement").

        This Debenture is free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights
or other similar rights of stockholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations of the Borrower
under this Debenture shall be secured by that certain Security Agreement dated
by and between the Borrower and the Holder of even date herewith.

        The following terms shall apply to this Debenture:


                          ARTICLE I. CONVERSION RIGHTS

        1.1 Conversion Right. The Holder shall have the right from time to time,
and at any time on or prior to the earlier of (i) the Maturity Date and (ii) the
date of payment of the Default Amount (as defined in Article III) pursuant to
Section 1.6(a) or Article III, the Optional Prepayment Amount (as defined in
Section 5.1 or any payments pursuant to Section 1.7, each in respect of the
remaining outstanding principal amount of this Debenture to convert all or any
part of the outstanding and unpaid principal amount of this Debenture into fully
paid and non-assessable shares of Common Stock, as such Common Stock exists on
the Issue Date, or any shares of capital stock or other securities of the
Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the "Conversion Price") determined as provided herein
(a "Conversion"); provided, however, that in no event shall the Holder be
entitled to convert any portion of this Debenture in excess of that portion of
this Debenture upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debentures or the unexercised or
unconverted portion of any other security of the Borrower (including, without
limitation, the warrants issued by the Borrower pursuant to the Purchase
Agreement) subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Debenture with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The Holder of this Debenture may waive the
limitations set forth herein by sixty-one (61) days written notice to the
Company. The number of shares of Common Stock to be issued upon each conversion
of this Debenture shall be determined by dividing the Conversion Amount (as
defined below) by the applicable Conversion Price then in effect on the date

                                       2

<PAGE>

specified in the notice of conversion, in the form attached hereto as Exhibit A
(the "Notice of Conversion"), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted by facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Borrower before 3:00 p.m., Los Angeles, California
time on such conversion date (the "Conversion Date"). The term "Conversion
Amount" means, with respect to any conversion of this Debenture, the sum of (1)
the principal amount of this Debenture to be converted in such conversion plus
(2) accrued and unpaid interest, if any, on such principal amount at the
interest rates provided in this Debenture to the Conversion Date plus (3)
Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to
Section 2(c) of that certain Registration Rights Agreement, dated as of December
31, 2001, executed in connection with the initial issuance of this Debenture and
the other Debentures issued on the Issue Date (the "Registration Rights
Agreement").

        1.2 Conversion Price.

            (a) Calculation of Conversion Price. The Conversion Price shall be
the lesser of (i) the Variable Conversion Price (as defined herein) and (ii) the
Fixed Conversion Price (as defined herein) (subject, in each case, to equitable
adjustments for stock splits, stock dividends or rights offerings by the
Borrower relating to the Borrower's securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The "Variable Conversion Price"
shall mean the Applicable Percentage (as defined herein) multiplied by the
Market Price (as defined herein). "Market Price" means the average of the lowest
three (3) Trading Prices (as defined below) for the Common Stock during the
twenty (20) Trading Day period ending one Trading Day prior to the date the
Conversion Notice is sent by the Holder to the Borrower via facsimile (the
"Conversion Date"). "Trading Price" means, for any security as of any date, the
intraday trading price on the Over-the-Counter Bulletin Board (the "OTCBB") as
reported by a reliable reporting service mutually acceptable to and hereafter
designated by Holders of a majority in interest of the Debentures and the
Borrower or, if the OTCBB is not the principal trading market for such security,
the intraday trading price of such security on the principal securities exchange
or trading market where such security is listed or traded or, if no intraday
trading price of such security is available in any of the foregoing manners, the
average of the intraday trading prices of any market makers for such security
that are listed in the "pink sheets" by the National Quotation Bureau, Inc. If
the Trading Price cannot be calculated for such security on such date in the
manner provided above, the Trading Price shall be the fair market value as
mutually determined by the Borrower and the holders of a majority in interest of
the Debentures being converted for which the calculation of the Trading Price is
required in order to determine the Conversion Price of such Debentures. "Trading
Day" shall mean any day on which the Common Stock is traded for any period on
the OTCBB, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded. "Applicable Percentage" shall mean
50.0%. The "Fixed Conversion Price" shall mean $.005.

                                       3

<PAGE>

            (b) Conversion Price During Major Announcements. Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving or
continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group
or entity (including the Borrower) publicly announces a tender offer to purchase
50% or more of the Borrower's Common Stock (or any other takeover scheme) (the
date of the announcement referred to in clause (i) or (ii) is hereinafter
referred to as the "Announcement Date"), then the Conversion Price shall,
effective upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to the lower of
(x) the Conversion Price which would have been applicable for a Conversion
occurring on the Announcement Date and (y) the Conversion Price that would
otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date, the Conversion Price shall be determined as set forth in this Section
1.2(a). For purposes hereof, "Adjusted Conversion Price Termination Date" shall
mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section 1.2(b)
has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section
1.2(b) to become operative.

        1.3 Authorized Shares. The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Debenture and the other Debentures issued pursuant to the Purchase
Agreement. The Borrower is required at all times to have authorized and reserved
two times the number of shares that is actually issuable upon full conversion of
the Debentures (based on the Conversion Price of the Debentures or the Exercise
Price of the Warrants in effect from time to time) (the "Reserved Amount"). The
Reserved Amount shall be increased from time to time in accordance with the
Borrower's obligations pursuant to Section 4(h) of the Purchase Agreement. The
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. In addition, if the Borrower shall issue
any securities or make any change to its capital structure which would change
the number of shares of Common Stock into which the Debentures shall be
convertible at the then current Conversion Price, the Borrower shall at the same
time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Debentures. The Borrower (i) acknowledges that
it has irrevocably instructed its transfer agent to issue certificates for the
Common Stock issuable upon conversion of this Debenture, and (ii) agrees that
its issuance of this Debenture shall constitute full authority to its officers
and agents who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Debenture.

         If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but
unissued shares of Common Stock available to effect such conversion in
accordance with the provisions of this Article I (a "Conversion Default"),
subject to Section 4.8, the Borrower shall issue to the Holder all of the shares
of Common Stock

                                       4

<PAGE>

which are then available to effect such conversion. The portion of this
Debenture which the Holder included in its Conversion Notice and which exceeds
the amount which is then convertible into available shares of Common Stock (the
"Excess Amount") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date additional shares
of Common Stock are authorized by the Borrower to permit such conversion, at
which time the Conversion Price in respect thereof shall be the lesser of (i)
the Conversion Price on the Conversion Default Date (as defined below) and (ii)
the Conversion Price on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Borrower shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Debenture plus (2)
accrued and unpaid interest on the unpaid principal amount of this Debenture
through the Authorization Date (as defined below) plus (3) Default Interest, if
any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
..24, multiplied by (z) (N/365), where N = the number of days from the day the
holder submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date") to the date (the "Authorization Date") that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Debenture. The
Borrower shall use its best efforts to authorize a sufficient number of shares
of Common Stock as soon as practicable following the earlier of (i) such time
that the Holder notifies the Borrower or that the Borrower otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof and (ii) a Conversion Default. The
Borrower shall send notice to the Holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default Payments for
each calendar month shall be paid in cash or shall be convertible into Common
Stock (at such time as there are sufficient authorized shares of Common Stock)
at the applicable Conversion Price, at the Holder's option, as follows:

            (a) In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) day of the month following
the month in which it has accrued; and

            (b) In the event Holder elects to take such payment in Common Stock,
the Holder may convert such payment amount into Common Stock at the Conversion
Price (as in effect at the time of conversion) at any time after the fifth day
of the month following the month in which it has accrued in accordance with the
terms of this Article I (so long as there is then a sufficient number of
authorized shares of Common Stock).

        The Holder's election shall be made in writing to the Borrower at any
time prior to 6:00 p.m., Los Angeles time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Borrower's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).

                                       5

<PAGE>

        1.4 Method of Conversion.

            (a) Mechanics of Conversion. Subject to Section 1.1, this Debenture
may be converted by the Holder in whole or in part at any time from time to time
after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion
(by facsimile or other reasonable means of communication dispatched on the
Conversion Date prior to 3:00 p.m., Los Angeles, California time) and (B)
subject to Section 1.4(b), surrendering this Debenture at the principal office
of the Borrower.

            (b) Surrender of Debenture Upon Conversion. Notwithstanding anything
to the contrary set forth herein, upon conversion of this Debenture in
accordance with the terms hereof, the Holder shall not be required to physically
surrender this Debenture to the Borrower unless the entire unpaid principal
amount of this Debenture is so converted. The Holder and the Borrower shall
maintain records showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of this
Debenture upon each such conversion. In the event of any dispute or discrepancy,
such records of the Borrower shall be controlling and determinative in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this
Debenture is converted as aforesaid, the Holder may not transfer this Debenture
unless the Holder first physically surrenders this Debenture to the Borrower,
whereupon the Borrower will forthwith issue and deliver upon the order of the
Holder a new Debenture of like tenor, registered as the Holder (upon payment by
the Holder of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid principal amount of this Debenture. The Holder
and any assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture
represented by this Debenture may be less than the amount stated on the face
hereof.

            (c) Payment of Taxes. The Borrower shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property on conversion
of this Debenture in a name other than that of the Holder (or in street name),
and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than
the Holder or the custodian in whose street name such shares are to be held for
the Holder's account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

            (d) Delivery of Common Stock Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile transmission (or other reasonable means
of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 1.4, the Borrower shall issue and deliver
or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within two (2)
business days after such receipt (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Debenture) (such second

                                       6

<PAGE>

business day being hereinafter referred to as the "Deadline") in accordance with
the terms hereof and the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g) of the Purchase Agreement that
certificates for shares of Common Stock issued on or after the effective date of
the Registration Statement upon conversion of this Debenture shall not bear any
restrictive legend).

            (e) Obligation of Borrower to Deliver Common Stock. Upon receipt by
the Borrower of a Notice of Conversion, the Holder shall be deemed to be the
holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on
this Debenture shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this Debenture being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash
or other assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the Borrower's obligation
to issue and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Borrower to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder of any
obligation to the Borrower, and irrespective of any other circumstance which
might otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in the Notice of
Conversion shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 3:00 p.m., Los Angeles, California time, on such
date.

            (f) Delivery of Common Stock by Electronic Transfer. In lieu of
delivering physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.

            (g) Failure to Deliver Common Stock Prior to Deadline. Without in
any way limiting the Holder's right to pursue other remedies, including actual
damages and/or equitable relief, the parties agree that if delivery of the
Common Stock issuable upon conversion of this Debenture is more than two (2)
days after the Deadline (other than a failure due to the circumstances described
in Section 1.3 above, which failure shall be governed by such Section) the
Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock. Such cash amount
shall be paid to Holder by the fifth day of the month following the month in
which it has accrued or, at the option of the Holder (by written notice to the
Borrower by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Debenture, in which
event interest shall accrue thereon in accordance with the terms of this
Debenture and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Debenture.

                                       7

<PAGE>

        1.5 Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Debenture may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor rule) ("Rule 144") or (iv)
such shares are transferred to an "affiliate" (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Debenture have been
registered under the Act as contemplated by the Registration Rights Agreement or
otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
each certificate for shares of Common Stock issuable upon conversion of this
Debenture that has not been so included in an effective registration statement
or that has not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend substantially
in the following form, as appropriate:

         "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES
         MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION
         OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
         COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
         UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER
         SAID ACT."

        The legend set forth above shall be removed and the Borrower shall issue
to the Holder a new certificate therefor free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act and the shares are so sold or
transferred, (ii) such Holder provides the Borrower or its transfer agent with
reasonable assurances that the Common Stock issuable upon conversion of this
Debenture (to the extent such securities are deemed to have been acquired on the
same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common
Stock issuable upon conversion of this Debenture, such security is registered
for sale by the Holder under an effective registration statement filed under the
Act or otherwise may be sold pursuant to Rule 144 without any restriction as to
the number of securities as of a particular date that can then be immediately
sold. Nothing in this Debenture shall (i) limit the Borrower's obligation under
the Registration Rights Agreement or (ii) affect in any way the Holder's
obligations to comply with applicable prospectus delivery requirements upon the
resale of the securities referred to herein.

                                       8

<PAGE>

        1.6 Effect of Certain Events.

            (a) Effect of Merger, Consolidation, Etc. At the option of the
Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as defined below) or
Persons when the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. "Person"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

            (b) Adjustment Due to Merger, Consolidation, Etc. If, at any time
when this Debenture is issued and outstanding and prior to conversion of all of
the Debentures, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Debenture
shall thereafter have the right to receive upon conversion of this Debenture,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder of this Debenture
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debenture) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter deliverable upon
the conversion hereof. The Borrower shall not effect any transaction described
in this Section 1.6(b) unless (a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special meeting of
stockholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Debenture) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written
instrument the obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.

                                       9

<PAGE>

            (c) Adjustment Due to Distribution. If the Borrower shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "Distribution"), then the Holder of this Debenture shall
be entitled, upon any conversion of this Debenture after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.

            (d) Adjustment Due to Dilutive Issuance. If, at any time when any
Debentures are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common Stock (a "Dilutive Issuance"), then immediately upon the Dilutive
Issuance, the Fixed Conversion Price will be reduced to the amount of the
consideration per share received by the Borrower in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.

            The Borrower shall be deemed to have issued or sold shares of Common
Stock if the Borrower in any manner issues or grants any warrants, rights or
options, whether or not immediately exercisable, to subscribe for or to purchase
Common Stock or other securities convertible into or exchangeable for Common
Stock ("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as "Options")
and the price per share for which Common Stock is issuable upon the exercise of
such Options is less than the Fixed Conversion Price then in effect, then the
Fixed Conversion Price shall be equal to such price per share. For purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon the exercise of such Options" is determined by dividing (i) the total
amount, if any, received or receivable by the Borrower as consideration for the
issuance or granting of all such Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Borrower upon the exercise of
all such Options, plus, in the case of Convertible Securities issuable upon the
exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options or upon
the conversion or exchange of Convertible Securities issuable upon exercise of
such Options.

            Additionally, the Borrower shall be deemed to have issued or sold
shares of Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options), and the price per share for

                                       10

<PAGE>

which Common Stock is issuable upon such conversion or exchange is less than the
Fixed Conversion Price then in effect, then the Fixed Conversion Price shall be
equal to such price per share. For the purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon such conversion or
exchange" is determined by dividing (i) the total amount, if any, received or
receivable by the Borrower as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Fixed Conversion Price will be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.

            (e) Purchase Rights. If, at any time when any Debentures are issued
and outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the "Purchase Rights")
pro rata to the record holders of any class of Common Stock, then the Holder of
this Debenture will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Debenture (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

            (f) Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in this
Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Borrower
shall, upon the written request at any time of the Holder, furnish to such
Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Debenture.

        1.7 Trading Market Limitations. Unless permitted by the applicable rules
and regulations of the principal securities market on which the Common Stock is
then listed or traded, in no event shall the Borrower issue upon conversion of
or otherwise pursuant to this Debenture and the other Debentures issued pursuant
to the Purchase Agreement more than the maximum number of shares of Common Stock
that the Borrower can issue pursuant to any rule of the principal United States
securities market on which the Common Stock is then traded (the "Maximum Share
Amount"), which shall be 19.99% of the total shares outstanding on the Issue
Date, subject to equitable adjustment from time to time for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating to
the Common Stock occurring after the date hereof. Once the Maximum Share Amount
has been issued (the date of which is hereinafter referred to as the "Maximum

                                       11

<PAGE>

Conversion Date"), if the Borrower fails to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Borrower or any of its securities on the Borrower's ability to issue shares
of Common Stock in excess of the Maximum Share Amount (a "Trading Market
Prepayment Event"), in lieu of any further right to convert this Debenture, and
in full satisfaction of the Borrower's obligations under this Debenture, the
Borrower shall pay to the Holder, within fifteen (15) business days of the
Maximum Conversion Date (the "Trading Market Prepayment Date"), an amount equal
to 130% times the sum of (a) the then outstanding principal amount of this
Debenture immediately following the Maximum Conversion Date, plus (b) accrued
and unpaid interest on the unpaid principal amount of this Debenture to the
Trading Market Prepayment Date, plus (c) Default Interest, if any, on the
amounts referred to in clause (a) and/or (b) above, plus (d) any optional
amounts that may be added thereto at the Maximum Conversion Date by the Holder
in accordance with the terms hereof (the then outstanding principal amount of
this Debenture immediately following the Maximum Conversion Date, plus the
amounts referred to in clauses (b), (c) and (d) above shall collectively be
referred to as the "Remaining Convertible Amount"). With respect to each Holder
of Debentures, the Maximum Share Amount shall refer to such Holder's pro rata
share thereof determined in accordance with Section 4.8 below. In the event that
the sum of (x) the aggregate number of shares of Common Stock issued upon
conversion of this Debenture and the other Debentures issued pursuant to the
Purchase Agreement plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of this Debenture and the other Debentures
issued pursuant to the Purchase Agreement, represents at least one hundred
percent (100%) of the Maximum Share Amount (the "Triggering Event"), the
Borrower will use its best efforts to seek and obtain Stockholder Approval (or
obtain such other relief as will allow conversions hereunder in excess of the
Maximum Share Amount) as soon as practicable following the Triggering Event and
before the Maximum Conversion Date. As used herein, "Stockholder Approval" means
approval by the stockholders of the Borrower to authorize the issuance of the
full number of shares of Common Stock which would be issuable upon full
conversion of the then outstanding Debentures but for the Maximum Share Amount.

        1.8 Status as Stockholder. Upon submission of a Notice of Conversion by
a Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Holder's allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Holder's rights as a Holder
of such converted portion of this Debenture shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Borrower to comply with the terms of this
Debenture. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Debenture for any reason, then (unless the Holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this Debenture with
respect to such unconverted portions of this Debenture and the Borrower shall,
as soon as practicable, return such unconverted Debenture to the Holder or, if
the Debenture has not been surrendered, adjust its records to reflect that such

                                       12

<PAGE>

portion of this Debenture has not been converted. In all cases, the Holder shall
retain all of its rights and remedies (including, without limitation, (i) the
right to receive Conversion Default Payments pursuant to Section 1.3 to the
extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Section 1.3) for the
Borrower's failure to convert this Debenture.


                          ARTICLE II. CERTAIN COVENANTS

        2.1 Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Debenture, the Borrower shall not without the Holder's
written consent (a) pay, declare or set apart for such payment, any dividend or
other distribution (whether in cash, property or other securities) on shares of
capital stock other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock or (b) directly or indirectly or through
any subsidiary make any other payment or distribution in respect of its capital
stock except for distributions pursuant to any shareholders' rights plan which
is approved by a majority of the Borrower's disinterested directors.

                  2.2 Restriction on Stock Repurchases. So long as the Borrower
shall have any obligation under this Debenture, the Borrower shall not without
the Holder's written consent redeem, repurchase or otherwise acquire (whether
for cash or in exchange for property or other securities or otherwise) in any
one transaction or series of related transactions any shares of capital stock of
the Borrower or any warrants, rights or options to purchase or acquire any such
shares.

        2.3 Borrowings. So long as the Borrower shall have any obligation under
this Debenture, the Borrower shall not, without the Holder's written consent,
create, incur, assume or suffer to exist any liability for borrowed money,
except (a) borrowings in existence or committed on the date hereof and of which
the Borrower has informed Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business or (c) borrowings, the proceeds of which shall be
used to repay this Debenture.

        2.4 Sale of Assets. So long as the Borrower shall have any obligation
under this Debenture, the Borrower shall not, without the Holder's written
consent, sell, lease or otherwise dispose of any significant portion of its
assets outside the ordinary course of business. Any consent to the disposition
of any assets may be conditioned on a specified use of the proceeds of
disposition.

        2.5 Advances and Loans. So long as the Borrower shall have any
obligation under this Debenture, the Borrower shall not, without the Holder's
written consent, lend money, give credit or make advances to any person, firm,
joint venture or corporation, including, without limitation, officers,
directors, employees, subsidiaries and affiliates of the Borrower, except loans,
credits or advances (a) in existence or committed on the date hereof and which
the Borrower has informed Holder in writing prior to the date hereof, (b) made
in the ordinary course of business or (c) not in excess of $50,000.

                                       13

<PAGE>

        2.6 Contingent Liabilities. So long as the Borrower shall have any
obligation under this Debenture, the Borrower shall not, without the Holder's
written consent, assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection and except assumptions, guarantees,
endorsements and contingencies (a) in existence or committed on the date hereof
and which the Borrower has informed Holder in writing prior to the date hereof,
and (b) similar transactions in the ordinary course of business.


                         ARTICLE III. EVENTS OF DEFAULT

        If any of the following events of default (each, an "Event of Default")
shall occur:

        3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Debenture, whether at
maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7, upon
acceleration or otherwise.

        3.2 Conversion and the Shares. The Borrower fails to issue shares of
Common Stock or Investment Options to the Holder (or announces or threatens that
it will not honor its obligation to do so) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Debenture
(for a period of at least sixty (60) days, if such failure is solely as a result
of the circumstances governed by Section 1.3 and the Borrower is using its best
efforts to authorize a sufficient number of shares of Common Stock as soon as
practicable), fails to transfer or cause its transfer agent to transfer
(electronically or in certificated form) any certificate for shares of Common
Stock issued to the Holder upon conversion of or otherwise pursuant to this
Debenture as and when required by this Debenture or the Registration Rights
Agreement, or fails to remove any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate for any shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Debenture as and when required by this Debenture or the Registration Rights
Agreement (or makes any announcement, statement or threat that it does not
intend to honor the obligations described in this paragraph) and any such
failure shall continue uncured (or any announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for ten (10) days after
the Borrower shall have been notified thereof in writing by the Holder.

        3.3 Failure to Timely File Registration or Effect Registration. The
Borrower fails to file the Registration Statement within fifteen (15) days
following the Issue Date or obtain effectiveness with the Securities and
Exchange Commission of the Registration Statement within sixty (60) days
following the Issue Date or such Registration Statement lapses in effect (or
sales cannot otherwise be made thereunder effective, whether by reason of the
Borrower's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement or otherwise) for more than
thirty (30) consecutive days or sixty (60) days in any twelve month period after
the Registration Statement becomes effective;

                                       14

<PAGE>

        3.4 Breach of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in Sections 1.3, 1.6 or 1.7 of this
Debenture, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement and such breach continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;

        3.5 Breach of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Purchase Agreement and the Registration
Rights Agreement), shall be false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to this
Debenture, the Purchase Agreement or the Registration Rights Agreement;

        3.6 Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business, or such a receiver or trustee shall otherwise be
appointed;

        3.7 Judgments. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;

        3.8 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower; or

        3.9 Delisting of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, the Nasdaq National
Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American
Stock Exchange;

        3.10 Default Under Other Debentures. An Event of Default has occurred
and is continuing under any of the other Debentures issued pursuant to the
Purchase Agreement.

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of the Holders of a majority of the aggregate principal amount of the
outstanding Debentures issued pursuant to the Purchase Agreement exercisable
through the delivery of written notice to the Borrower by such Holders (the
"Default Notice"), and upon the occurrence of an Event of Default specified in
Section 3.6 or 3.8, the Debentures shall become immediately due and payable and
the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the greater of (i) 130% times the sum of (w) the
then outstanding principal amount of this Debenture plus (x) accrued and unpaid
interest on the unpaid principal amount of this Debenture to the date of payment
(the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the

                                       15

<PAGE>

amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of
the Registration Rights Agreement (the then outstanding principal amount of this
Debenture to the date of payment plus the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the "Default Sum") or (ii) the
"parity value" of the Default Sum to be prepaid, where parity value means (a)
the highest number of shares of Common Stock issuable upon conversion of or
otherwise pursuant to such Default Sum in accordance with Article I, treating
the Trading Day immediately preceding the Mandatory Prepayment Date as the
"Conversion Date" for purposes of determining the lowest applicable Conversion
Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the highest Closing Price for the Common
Stock during the period beginning on the date of first occurrence of the Event
of Default and ending one day prior to the Mandatory Prepayment Date (the
"Default Amount") and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity. If the Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default
(and so long and to the extent that there are sufficient authorized shares), to
require the Borrower, upon written notice, to immediately issue, in lieu of the
Default Amount, the number of shares of Common Stock of the Borrower equal to
the Default Amount divided by the Conversion Price then in effect.


                            ARTICLE IV. MISCELLANEOUS

        4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

        4.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be 446 Lincoln
Highway, Fairless Hills, Pennsylvania 19030, facsimile number: 267-580-1090).
Both the Holder and the Borrower may change the address for service by service
of written notice to the other as herein provided.

        4.3 Amendments. This Debenture and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the Holder. The
term "Debenture" and all reference thereto, as used throughout this instrument,
shall mean this instrument (and the other Debentures issued pursuant to the
Purchase Agreement) as originally executed, or if later amended or supplemented,
then as so amended or supplemented.

                                       16

<PAGE>

        4.4 Assignability. This Debenture shall be binding upon the Borrower and
its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Debenture must be an
"accredited investor" (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Debenture to the contrary, this Debenture may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.

        4.5 Cost of Collection. If default is made in the payment of this
Debenture, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.

        4.6 Governing Law. THIS DEBENTURE SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS DEBENTURE, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS DEBENTURE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

        4.7 Certain Amounts. Whenever pursuant to this Debenture the Borrower is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Debenture may be difficult to determine and the amount to be so paid by the
Borrower represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this
Debenture and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Debenture at a price in excess of the price paid for
such shares pursuant to this Debenture. The Borrower and the Holder hereby agree
that such amount of stipulated damages is not plainly disproportionate to the
possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Debenture into shares of Common Stock.

                                       17

<PAGE>

        4.8 Allocations of Maximum Share Amount and Reserved Amount. The Maximum
Share Amount and Reserved Amount shall be allocated pro rata among the Holders
of Debentures based on the principal amount of such Debentures issued to each
Holder. Each increase to the Maximum Share Amount and Reserved Amount shall be
allocated pro rata among the Holders of Debentures based on the principal amount
of such Debentures held by each Holder at the time of the increase in the
Maximum Share Amount or Reserved Amount. In the event a Holder shall sell or
otherwise transfer any of such Holder's Debentures, each transferee shall be
allocated a pro rata portion of such transferor's Maximum Share Amount and
Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount
which remains allocated to any person or entity which does not hold any
Debentures shall be allocated to the remaining Holders of Debentures, pro rata
based on the principal amount of such Debentures then held by such Holders.

        4.9 Damages Shares. The shares of Common Stock that may be issuable to
the Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section
2(c) of the Registration Rights Agreement ("Damages Shares") shall be treated as
Common Stock issuable upon conversion of this Debenture for all purposes hereof
and shall be subject to all of the limitations and afforded all of the rights of
the other shares of Common Stock issuable hereunder, including without
limitation, the right to be included in the Registration Statement filed
pursuant to the Registration Rights Agreement. For purposes of calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein, amounts convertible into Damages Shares ("Damages Amounts")
shall not bear interest but must be converted prior to the conversion of any
outstanding principal amount hereof, until the outstanding Damages Amounts is
zero.

        4.10 Denominations. At the request of the Holder, upon surrender of this
Debenture, the Borrower shall promptly issue new Debentures in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $50,000 as the Holder shall request.

        4.11 Purchase Agreement. By its acceptance of this Debenture, each
Holder agrees to be bound by the applicable terms of the Purchase Agreement.

        4.12 Notice of Corporate Events. Except as otherwise provided below, the
Holder of this Debenture shall have no rights as a Holder of Common Stock unless
and only to the extent that it converts this Debenture into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of the
Borrower's shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other

                                       18

<PAGE>

securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event
requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section
4.12.

        4.13 Remedies. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Borrower acknowledges that the remedy at law for a breach of its obligations
under this Debenture will be inadequate and agrees, in the event of a breach or
threatened breach by the Borrower of the provisions of this Debenture, that the
Holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Debenture
and to enforce specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other security being
required.


                         ARTICLE V. OPTIONAL PREPAYMENT

        5.1. Optional Prepayment. Notwithstanding anything to the contrary
contained in this Article V, for not more than thirty (30) days from the date
hereof, so long as (i) no Event of Default or Trading Market Prepayment Event
shall have occurred and be continuing, and (ii) the Borrower has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of the Debentures, then at any time after the Issue Date, the
Borrower shall have the right, exercisable on not less than ten (10) Trading
Days prior written notice to the Holders of the Debentures (which notice may not
be sent to the Holders of the Debentures until the Borrower is permitted to
prepay the Debentures pursuant to this Section 5.1), to prepay all of the
outstanding Debentures in accordance with this Section 5.1. Any notice of
prepayment hereunder (an "Optional Prepayment") shall be delivered to the
Holders of the Debentures at their registered addresses appearing on the books
and records of the Borrower and shall state (1) that the Borrower is exercising
its right to prepay all of the Debentures issued on the Issue Date and (2) the
date of prepayment (the "Optional Prepayment Notice"). On the date fixed for
prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of
the Optional Prepayment Amount (as defined below) to or upon the order of the
Holders as specified by the Holders in writing to the Borrower at least one (1)
business day prior to the Optional Prepayment Date. If the Borrower exercises
its right to prepay the Debentures, the Borrower shall make payment to the
holders of an amount in cash (the "Optional Prepayment Amount") equal to 130%
multiplied by the sum of (w) the then outstanding principal amount of this
Debenture plus (x) accrued and unpaid interest on the unpaid principal amount of

                                       19

<PAGE>

this Debenture to the Optional Prepayment Date plus (y) Default Interest, if
any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section
2(c) of the Registration Rights Agreement (the then outstanding principal amount
of this Debenture to the date of payment plus the amounts referred to in clauses
(x), (y) and (z) shall collectively be known as the "Optional Prepayment Sum").
Notwithstanding notice of an Optional Prepayment, the Holders shall at all times
prior to the Optional Prepayment Date maintain the right to convert all or any
portion of the Debentures in accordance with Article I and any portion of
Debentures so converted after receipt of an Optional Prepayment Notice and prior
to the Optional Prepayment Date set forth in such notice and payment of the
aggregate Optional Prepayment Amount shall be deducted from the principal amount
of Debentures which are otherwise subject to prepayment pursuant to such notice.
If the Borrower delivers an Optional Prepayment Notice and fails to pay the
Optional Prepayment Amount due to the Holders of the Debentures within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to redeem the Debentures pursuant to this Section 5.1.











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                                       20


<PAGE>


        IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in
its name by its duly authorized officer this 30th day of September, 2002.


                                        DIGITAL DESCRIPTOR SYSTEMS, INC.



                                        By:  ______________________________
                                             Michael J. Pellegrino
                                             President & Chief Operating Officer














                                       21

<PAGE>



                                                                       EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                       in order to Convert the Debentures)

        The undersigned hereby irrevocably elects to convert $________principal
amount of the Debenture (defined below) into shares of common stock, par value
$0.001 per share ("Common Stock"), of Digital Descriptor Systems, Inc., a
Delaware corporation (the "Borrower") according to the conditions of the
convertible debentures of the Borrower dated as of September 30, 2002 (the
"Debentures"), as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any. A copy of each Debenture is attached hereto (or
evidence of loss, theft or destruction thereof).

        The Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ( "DWAC
Transfer").

         Name of DTC Prime Broker:____________________________________
         Account Number:______________________________________________

        In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby requests
that the Borrower issue a certificate or certificates for the number of shares
of Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

         Name:________________________________________________________
         Address:_____________________________________________________

        The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Debentures shall be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from
registration under the Act.

                  Date of Conversion:___________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to
                  Conversion of the Debentures:______________
                  Signature:___________________________________
                  Name:______________________________________
                  Address:____________________________________

The Borrower shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Debenture(s) to be converted, and shall make payments pursuant to the Debentures
for the number of business days such issuance and delivery is late.

                                      A-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>8
<FILENAME>ex10-13.txt
<DESCRIPTION>EXH10-13.TXT
<TEXT>
<PAGE>


                                                                   EXHIBIT 10.13


                        Digital Descriptor Systems, Inc.
                               446 Lincoln Highway
                            Fairless Hills, PA 19030


                                                     September 30, 2002

AJW Qualified Partners, LLC
AJW Offshore, Ltd.
1044 Northern Boulevard
Suite 302
Roslyn, NY  11576

                  Re:      Digital Descriptor Systems, Inc.- Private Placement

Dear Sirs:

                  This letter sets forth the terms and conditions pursuant to
which you (collectively, the "Buyers") have agreed to purchase from Digital
Descriptor Systems, Inc. (the "Company") the following: (i) Secured Convertible
Debentures in the aggregate principal amount of $100,000 (the "Debentures") and
(ii) warrants to purchase 300,000 shares of the Company's Common Stock (the
"Warrants"), each in the form attached to this letter agreement, for the
aggregate consideration of $100,000.

                  As an inducement to the Buyers purchasing the Debentures and
the Warrants, the Company hereby represents to the Buyers that the
representations and warranties made by the Company in that certain Securities
Purchase Agreement dated as of December 31, 2001 by and among the Company and
the other parties thereto (the "Purchase Agreement") are true and correct,
except as otherwise set forth in the Schedules attached to this letter
agreement. Each Buyer severally (and not jointly) represents and warrants to the
Company that each of the representations and warranties contained in Section 2
of the Purchase Agreement are true and correct with respect to such Buyer, to
the same extent as if such representations and warranties were made by such
Buyer in the Purchase Agreement. The Company hereby agrees to perform all of the
other covenants and agreements contained in the Purchase Agreement to the same
extent as if such covenants and agreements were made to the Buyers, except as
otherwise set forth in the Schedules attached to this letter agreement. In
addition, the Company agrees that the terms and conditions of that certain
Registration Rights Agreement dated as of December 31, 2001 by and among the
Company and the other parties thereto shall apply to the shares of Common Stock
underlying the Debentures and the Warrants, including without limitation the
agreements by the Company (i) to register three (3) times the number of shares
of Common Stock issuable upon conversion of the Debentures and upon exercise of
the Warrants, (ii) to file a Registration Statement in connection with this
transaction within five (5) business days of the closing of this transaction and
(iii) to use its best efforts to cause such Registration Statement to be
declared effective by the SEC within fifteen (15) business days of the closing
of this transaction.



<PAGE>


                  Please signify your agreement with the foregoing by executing
this Letter Agreement where indicated and returning it to the undersigned.

                                       Sincerely,

                                       DIGITAL DESCRIPTOR SYSTEMS, INC.


                                       By:
                                          ----------------------------
                                          Michael J. Pellegrino
                                          President & Chief Operating Officer
ACCEPTED AND AGREED:


AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC

By:
   ------------------------------------
         Corey S. Ribotsky
         Manager


AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC


By:
   ------------------------------------
         Corey S. Ribotsky
         Manager





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>9
<FILENAME>ex23-2.txt
<DESCRIPTION>EX23-2.TXT
<TEXT>
<PAGE>



                                                                    Exhibit 23.2



                         CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 23, 2001, in the Registration Statement (Form
SB-2, Amendment No. 5, No. 333-82662) and related Prospectus of Digital
Descriptor Systems, Inc. for the Registration of 62,184,841 shares of Common
Stock.


                                                     /s/ Ernst & Young LLP



Philadelphia, Pennsylvania
October 10, 2002




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>ex23-3.txt
<DESCRIPTION>EX23-3.TXT
<TEXT>
<PAGE>



                                                                    EXHIBIT 23.3





                         CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 23, 2002, in the Registration Statement (form
SB-2, Amendment No. 5, No. 333-82662) and the related Prospectus of Digital
Descriptor Systems, Inc. for the Registration of 62,184,841 shares of Common
Stock dated October 10, 2002.





/s/ WithumSmith+Brown
Newtown, Pennsylvania
October 10, 2002














</TEXT>
</DOCUMENT>
</SUBMISSION>
