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The following is an excerpt from a 10KSB SEC Filing, filed by DIGITAL DESCRIPTOR SYSTEMS INC on 4/2/2001.
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ALLIED SECURITY INNOVATIONS, INC. - 10KSB - 20010402 - PART_I

PART I

ITEM 1. Description of Business

General Business Development

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

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.

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.

DDSI anticipates that in the future it will need to adapt its imaging technology software to new uses, such as security devices, employee and school identification systems and access control systems. These potential applications are currently in the discussion phase and there are no Company resources budgeted for them at this time.

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. Compu-Capture(R) was introduced into the market in 1989. Since that time, DDSI has installed approximately 350 systems in 46 states in the United States, Europe, South America, Canada, Mexico and Bahamas. During the years ended December 31, 2000, 1999 and 1998, 93%, 95% and 99% respectively of DDSI's revenues were to domestic customers.

DDSI has marketed the Compu-Color(R) Assessor Program that combines digitized images from videotapes or photographs of real estate with buildings or other improvements, together with relevant tax assessment information. Compu-Color(R) was introduced in 1986. The program was designed for use by local tax assessors as a method of maintaining a visual record of all assessed improved properties that can be rapidly accessed with the relevant textual information. The Compu-Color Assessor Program contributed approximately two percent of DDSI's revenues in 1999. The market for this product is minimal, therefore, DDSI has withdrawn from this portion of the market place.

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Product and Services

Digital Descriptor Systems, Inc. provides hardware and software computer installations to law enforcement agencies, which installations utilize digitized video and scanned images and text in order to record and retrieve information. DDSI has developed and utilizes computer programs that digitize videotaped or scanned images to a computer program medium and provide for rapid retrieval of the information together with related textual information pertaining to the property or subject.

Compu-Capture(R)
Compu-Capture(R) is the law enforcement application of DDSI's system which 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. A video image of the subject, a "mug shot", is taken by the booking officer. One problem experienced by law enforcement agencies in booking subjects is the risk to officers as a result of the physical movement and transportation of subjects during the booking process. The Compu-Capture(R) system allows the law enforcement agency to complete more than one stage in the booking process, such as entering booking information and taking a mug shot, at one location. In addition, 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 rapidly 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. The Compu-Capture(R) systems allow the officer conducting a search to 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. In the requested search, 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.

Once entered into the Compu-Capture(R) system, the visual image and textual material can be utilized in a variety of ways. 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.

To date, DDSI has installed approximately 350 Compu-Capture(R) systems.

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The Compu-Capture(R) system's technology can be used in commercial applications that are unrelated to law enforcement. DDSI believes that versions of this system are suitable 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 various products that DDSI currently provides are as follows:

Compu-Capture(R) 2000
Compu-Capture(R) 2000 (CPC2000) 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 to an existing records or jail management system. The database allows for the capture of basic demographic system. The database allows physical characteristics. This information can then be sorted for quick and easy retrieval of a particular record or various records with similar characteristics. CPC2000 can be used on a stand alone Personal Computer or networked together. The price range for the Compu-Capture (R) 2000 is $12,000 to $45,000. The price range varies depending on the size of the system ordered and the jurisdictions specific requirements.

Compu-Capture(R) 2000/FE Compu-Capture(R) 2000/FE is DDSI's "front end" product that image-enables any host based records or jail management system. The advantage to this product is it eliminates multiple databases and duplicate data entry from one system to another. The price range for the Compu-Capture (R) 2000/FE $16,000 to $50,000. The price range varies depending on the size of the system ordered and the jurisdictions specific requirements.

Compu-Capture(R) 2000/API DDSI is the only Company to offer its API's to system integrators with client server applications. A systems integrator can make calls to these API's and build a seamless interface from their records or jail management system to DDSI's imaging system. The benefit for the end user is a self contained product that has a consistent look and feel, eliminating the need to learn the functionality of two separate systems. The price range for the Compu-Capture(R) 2000/API $16,000 to $50,000. The price range varies depending on the size of the system ordered and the jurisdictions specific requirements.

Compu-Capture(R) lite
DDSI has developed a "lite" version of its software to address the needs of smaller agencies of the arresting market. The "lite" version will provide an entry-level system that the jurisdictions can build upon. The base price for the Compu-Capture(R) lite is $3995.

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. The Compu-Sketch is presently installed in approximately 500 jurisdictions worldwide. The base price for the Compu-Sketch(R) $2495.

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Compu-Scene
The Compu-Scene program makes accident and crime scene drawings easy. The application uses a computer aided drafting program to compose the drawings with simple drag-n-drop technology to place the specialized drawings or templates. DDSI has created hundreds of templates including; weapons, body parts, furniture, vehicles, shrubs, street signs, etc. The user simply draws a room or intersection to scale with the CAD program and then simply drops in the pre-drawn templates to complete the scene.

SI-3000
DDSI's management believes that the type and amount of information a company, agency or jurisdiction collects and generates is growing at a fast pace. The variety of information collected includes hand written documents, computer generated reports, mugshots, fingerprints, photographs, video and digital images. DDSI believes that most agencies have their information stored in multiple formats and locations and is generally maintained in a stand-alone environment (i.e. in file cabinets and non-networked computer databases). In order for the information to be useful, it must be accurate and easily accessible throughout the agency. Without an integrated information management strategy, data integrity suffers while productivity diminishes. DDSI believes that today's technology trend is moving towards client server applications in an open environment (i.e. allowing access to information stored at multiple locations) because system server applications provides agencies with a method to share data while driving computing costs down.

SI-3000 is an information management strategy that capitalized on the above referenced technology trend. The SI-3000 provides companies and agencies the opportunity to purchase products and services that will move them in the direction of "paperless environment".

The SI-3000 product creates an "Electronic file folder" that integrates hand written documents, computer reports, photos, fingerprints, signatures and data into a central repository. Once the information is indexed, it becomes accessible to the end user in a multitude of ways, all with a single easy to use interface. In addition, SI-3000 can be easily customized by non-programming personnel. This provides a significant competitive advantage in the labor-intensive systems integration business. The price for the SI-3000 $45,000 to $285,000. which is reflected by the scalability of the final design and multi-jurisdictional requirements, i.e. state or county correctional locations.

Compu-Color(R) Assessor Program The Compu-Color(R) Assessor Program has recently been discontinued by DDSI. A lack of a national imaging standard has made this an unprofitable product to carry. This product applies imaging technology to produce digitized images related to textual information for use in tax assessment jurisdictions. Tax assessors generally maintain pictures of all properties with buildings or other improvements within their jurisdictions. The Compu-Color(R) Assessor Program allows an assessor's office to electronically maintain this picture as part of a computer system that links the image with relevant text about the property. The image and text can be retrieved and viewed together on the computer screen or printed out on an attached printer.

The Compu-Color(R) system processes a video or photographic image of improved properties and stores the image to a computerized record, together with relevant information from the assessor's records with respect to the improved properties. The program can create a hard copy picture of the image, including images of any comparable improved properties.

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As an additional service that was provided for assessor's offices interested in purchasing the Compu-Color(R) system, DDSI will process and store the assessor's existing files on a Compu-Color(R) system. This service will enable assessors to have all records on the same computerized system.

Maintenance and Support

In addition to the installation of DDSI's systems in an agency (tax assessor or law enforcement), DDSI trains the personnel of the agency in the use and operation of the system. After installation, 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. Over ninety percent (90%) of DDSI's customers purchase ongoing maintenance and support at the time of installation of the system.

New Products

FMS ("Fingerprint Matching System")

In February of 2000, DDSI secured a royalty license from Harris Corporation, Melbourne, Florida for a software suite called PowerMatch(TM) that enables the end user to capture, digitize, store, retrieve and/or match or sort fingerprints. The Harris agreement provides DDSI with a worldwide, non-exclusive license to use the Power Match Software (FMS). The FMS is a fingerprint matching solution and can be utilized either as a stand alone unit or in conjunction with the Compu-Scan Device.

DDSI renamed the software FMS ("Fingerprint Matching System"). DDSI has the license for the systems use in the criminal justice field. The license calls for DDSI to pay a sliding scale royalty fee to Harris Corporation on FMS gross sales. To date no FMS sales have occurred.

The current Compu-Capture(R), Compu-Scan 3000 and SI 3000 can be integrated with this software. It performs its matching, storage and capturing functions under the FBI approved AINSI-NIST and NCIC 2000 regulations. This software has several superior features that allows it to be installed on NT servers as well as PCs, for example and thus is very flexible in jurisdiction's size. 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. Many of the current installed jurisdictions of DDSI can use a positive ID system integrated to their mugshot and records management modules.

The Company's current sales force will offer FMS along with the current products. Additional sales personnel will be added as sales acceptance is achieved.

Compu-Scan 3000
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. The commercialization of this technology has been the primary focus of the Company's development activities. 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 has worldwide rights to sell this product without a royalty fee. FBI certification will be necessary to sell the Compu-Scan 3000 device to the state, local and federal jurisdictions, but such certification is not required to sell the device for commercial (non government) uses.

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DDSI plans to distribute the Compu-Scan, a non-contact inkless direct reader fingerprint system in conjunction with its Compu-Capture(R) products. Additionally, DDSI intends to market the non-contact inkless fingerprint system for commercial applications, such as in the security and biometric systems industry, which can incorporate the product in access control devices. DDSI's non-contact inkless fingerprint system electronically reads and creates a digital image of a fingerprint. Competitive contact inkless fingerprint capture devices 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. The optical image is then converted into a digital image by a photo-imaging detector. In contrast, though DDSI's non-contact device operates in a similar manner, there is no direct contact by the finger to the device. The Compu-Scan captures the fingerprint in the following manner: the finger is placed 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. DDSI 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.

The Company feels it has completed all of the final seven tests required and submitted the results to the FBI on February 15, 2001. There are no assurances by the Company that the FBI will certify this technology and device.

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 eight full-time regional 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 such as IBM Business Partners and other hardware suppliers. See below "IBM and other Partners" for more detail.

DDSI anticipates that its future marketing strategy for its Law Enforcement products will focus on expanding the quality and size of sales to law enforcement agencies and jail facilities of its existing Compu-Capture(R) program and new compatible products in the same field, such as Compu-Sketch and Compu-Scene and the new LiveScan (Compu-Scan 3000) device. In its latest survey conducted by the Law Enforcement Management and Administrative Statistics (LEMAS) program of the Bureau of Justice Statistics of the United States

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Department of Justice (the "LEMAS Survey"), of a nationally representative sample of state and local police departments indicated that there are approximately 17,000 state and local law enforcement agencies. Of those agencies, 52% of the agencies surveyed, employing 90% of all sworn officers, were using one or more types of computers. Of local police departments surveyed, 30% use computers for criminal investigations, criminal histories and Uniform Crime Reports. DDSI believes that as law enforcement agencies become more familiar with available technology, and agencies like the FBI continue to require certain standards of reporting crimes (NCIC2000), the market for products using computer technology, such as Compu-Capture(R), Compu-Scan and Compu-Capture(R) lite will increase.

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.

DDSI also relies on maintaining ongoing relationships with vendors, especially IBM Business Partners, for continuing sales introductions to new customers. DDSI has concentrated on expanding the compatibility of its Compu-Capture(R) system with more computer software applications in order to expand the number of vendors that may recommend DDSI's products.

Business Alliances
Currently approximately one-half of the revenues from DDSI's sales are generated from business alliance relationships. For example, one such business alliance is with IBM. IBM establishes a business alliance with certain vendors that sell software applications that are compatible with IBM hardware. To increase its sales through these alliances, DDSI has directed a portion of its research and development efforts in the last five years to developing software interfaces which enable the Compu-Capture(R) program to operate in conjunction with various records and jail management applications and other law enforcement programs using IBM compatible hardware. DDSI believes that part of its growth will continue to come through these business alliances.

DDSI has recently begun exploring the market for its products in the European, South and Central American and other international markets. DDSI is also working in conjunction with IBM to develop some of these countries by displaying and making its products available by IBM at their Electronic Institute for Government, located in Washington D.C. and Shanghai, China. This facility brings in IBM sales personnel and end users from around the world to preview IBM's entire Public Sector offerings. IBM has duplicated this facility in Shanghai, China and has ordered and installed a similar display to demonstrate DDSI's products there.

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

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Due to the high market penetration by the Company's strategic alliances, the Company 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.

Strategic 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) and Compu-Color(R) systems are compatible will assist DDSI in maintaining its competitiveness.

Sales by Geographic Area

During the fiscal years ended December 31, 2000, 1999, and 1998, 93%, 95% and 99% respectively of DDSI's revenues have been from domestic customers. The sales for 2000, 1999 and 1998 were $205,953, $150,209 and $6,104 respectively, 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 two national competitors, Printrak Inc., Anaheim, CA (recently purchased by Motorola which has approximately 200 video mug shot installations, and ImageWare Systems of San Diego, California, which has approximately 65 installations.

The Compu-Scan 3000 Livescan device is not yet available to the industry and consequently is behind its two main competitors, Digital Biometrics, Inc (recently merged with Visionics), and Identix Incorporated market inkless computerized fingerprint capture systems on a national basis and each have received FBI certification. Both companies are publicly held corporations and have been marketing their fingerprint systems for several years. DDSI intends to market its Compu-Scan 3000 inkless fingerprint system in conjunction with its Compu-Capture(R) system as well as in a network or a stand-alone mode.

The Compu-Sketch is a computerized, non-artistic, professional composite system. Though there is significant competition is 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 not individually marketed. DDSI carries it in order to provide to its customers a more complete package of products.

The SI-3000 Systems Integration solution has no direct competitors. The SI-3000 is marketed to large multi-jurisdiction counties.

The FMS solution resembles other fingerprint capture, store, retrieve 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, and intends to package it with its Compu-Scan system.

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Motorola's (NYSE:MOT) entrance into the Criminal Justice field by the purchase of Printrak Inc., offers a suite of solutions from data transmission to MDT (patrol cars) through bookings, fingerprint capture, mug shots and related systems. Printrak's products are centered around records management, jail management and AFIS solutions. AFIS is a large computerized installation used generally at the state level, that compares fingerprints that are entered into the system from different jurisdictions and identifies those prints within hours versus days and weeks when done by hand. Printrak's main product by dollar volume is AFIS. DDSI believes that Motorola would most likely specialize in large installations, where as DDSI's target is the small and medium size markets. Thus, we believe Motorola's entrance into the industry should have a minimal negative affect on our Company and management believes Motorola's entrance into the field will help advance product knowledge to the digitized imaging market.

DDSI believes its inkless non-contact technology is a superior technology compared to the older generation inkless contact method. Our approach does away with the expensive cost of replacing the glass platen as a result of wear and tear, and the smearing of oily residue from fingers placed on the platen and other contact related problems. In addition, DDSI's device provides for officer safety by limiting physical contact (the positioning of suspects fingers by holding his hand in place) with the suspect in the fingerprint capture sequence. DDSI's inkless non-contact device is substantially smaller than the inkless contact device (the size of two VCR's for the non-contact devices compared to the size of a standard refrigerator for the contact device). The Compu-Scan 3000 also has no moving parts and therefore does not need frequent recalibration as do the inkless contact devices. The price of the Company's device will range between $25,000 and $45,000 depending on final configuration.

Suppliers

DDSI has sold most of its systems for use on IBM or other manufacturers' personal computers. However, DDSI's programs are compatible with the IBM AS400 or IBM clones and also products of other 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 where 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 and has recently completed the submission process.

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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.

Product Liability Insurance

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

Research and Development

DDSI is currently engaged in a development contract with ISC/US, an engineering firm with a specialized background in fingerprint technology, to develop a computerized non-contact inkless fingerprint capture device called the Compu-Scan 3000. Under this agreement, DDSI paid ISC/US $635,000 in funds (non reimbursable) to develop the Compu-Scan 3000 with DDSI receiving worldwide marketing and production rights to this product. This engagement will be in effect until FBI certification is received on Compu-Scan 3000. The agreement provides that there is no royalty payment involved. FBI certification will be necessary to sell the Compu-Scan device to the United States state, local and federal jurisdictions; however, FBI certification is not required to sell the device for commercial uses. FBI certification is a multi-step process. The Company has successfully completed the application process, however there can be no assurance that the FBI will certify this technology and device.

While there are current products that deploy inkless technology, none have the capabilities or the footprint (approximately one-tenth the size of current competitive products) that the DDSI LiveScan will have upon introduction.

Patents, Trademarks and Licenses

DDSI has one patent application, number 09/08/800, for a "Device and Method for Scanning and Mapping a Surface", which was filed in October 1998. The primary use of the device is a contactless fingerprinting system.

DDSI owns the proprietary rights to the software used in the Compu-Capture(R) and Compu-Color(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.

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The following names are trademarked by DDSI and are nationally recognized by our marketplace and associated with DDSI: Compu-Capture 2000, Compu-Scan, Compu-Scene, Compu-Color, Compu-Sketch, SI3000, Compu-Capture 2000 FE and Compu-Capture Activex32.

Other Events

During January 2001 through March 2001, the Company issued $200,000 of convertible debentures to two investors. These debentures mature on March 4, 2002 and accrue interest at 12% per annum. The holder has the right to convert the debentures to common shares at any time through maturity at the specified conversion prices. The debenture holders received warrants to purchase 200,000 common shares at an exercise price the lesser of: $0.036 per share or the average of the lowest three trading prices during the 20 days preceding the exercise date. The debentures are collateralized by substantially all of the Company's assets.

During March 2001, the Company granted 1,100,000 shares of restricted common stock for services performed. Such shares were valued at the fair market value on the date the shares were granted.

On February 26, 2001, the Company announced the approval for the Company's Common Stock to return to the OTC Bulletin Board.

On February 22, 2001, the Company announced the completion of its Systems Integration System (SI-3000) installation at the Hamilton, Ohio Police Department and also announced they were awarded a contract for their Systems Integration system (SI-3000) by the Tulare County, CA Sheriff and Probation Department. This is DDSI's 92nd installation in California.

On February 15, 2001, the Company announced the completion of its submission to the FBI of its patent pending Compu-Scan 3000 Live Scan device for FBI certification.

On January 11, 2001, the Company announced they were awarded new contracts by Linn County, Iowa Sheriff's Department, Opelika, Alabama and Lubbock, Texas Police Department, for their Systems Integration System (SI-3000).

On December 19, 2000, the Company announced that the Company had been awarded four new contracts, two in the Greater Boston Area (Arlington and Watertown Police Departments) and two in New Jersey (Plainfield and Kearney Police Departments). All four departments will be utilizing the Compu-Capture(R) application for their booking/Mugshot needs. Upon completion they will have the 5th generation of DDSI's software, Compu-Capture/ActiveX32 System.

Employees

The Company employs a total of 20 full time employees and 1 part time employee.

ITEM 2. Description of Property

The Company operates from a single location. During May 2000, the Company entered into a new five-year operating lease for its office facility. The office facility is located at 446 Lincoln Highway, Fairless Hills, PA. 19030, and contains approximately 5,900 square feet of office space. Future minimum lease commitments in connection with this lease are approximately $120,200 in 2001, $115,400 in 2002, $118,300 in 2003, $111,600 in 2004 and $54,700 in 2005.

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ITEM 3. Legal Proceedings

Our Company is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against DDSI has been threatened.

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

There have been no submission of matters to a vote of Securities holders during fiscal year 2000.

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