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<SEC-DOCUMENT>0001144204-04-019638.txt : 20041117
<SEC-HEADER>0001144204-04-019638.hdr.sgml : 20041117
<ACCEPTANCE-DATETIME>20041117170049
ACCESSION NUMBER:		0001144204-04-019638
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20041111
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing
ITEM INFORMATION:		Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20041117
DATE AS OF CHANGE:		20041117

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DATA SYSTEMS & SOFTWARE INC
		CENTRAL INDEX KEY:			0000880984
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				222786081
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-19771
		FILM NUMBER:		041152752

	BUSINESS ADDRESS:	
		STREET 1:		200 RTE 17
		CITY:			MAHWAH
		STATE:			NJ
		ZIP:			07430
		BUSINESS PHONE:		2015292026

	MAIL ADDRESS:	
		STREET 1:		200 ROUTE 17
		CITY:			MAHWAH
		STATE:			NJ
		ZIP:			07430

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DEFENSE SOFTWARE & SYSTEMS INC
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>v08981.txt
<TEXT>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K
                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

     Date of Report (Date of earliest event reported) November 11, 2004
                                                     -------------------

                          DATA SYSTEMS & SOFTWARE INC.
             (Exact name of Registrant as Specified in its Charter)

          Delaware                      0-19771                 22-2786081
- -------------------------------------------------------------------------------
(States or Other Jurisdiction  (Commission file Numbers)   (IRS Employer
    of Incorporation)                                     Identification No.)

                     200 Route 17, Mahwah, New Jersey 07430
               ---------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's telephone number, including area code (201) 529-2026
                                                           --------------

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)

|_| Soliciting material pursuant to Rule 14a-2 under the Exchange Act (17 CFR
240.14a-2)

|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))

|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
<PAGE>

Section 2 - Financial Information

Item 2.02  Results of Operations and Financial Condition.

         On November 12, 2004, the Registrant issued a press release reporting
financial results for the third quarter of 2004. The press release is attached
as Exhibit 99.1 and incorporated by reference herein.

Section 3 - Securities and Trading Markets

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard.

         On November 11, 2004, Nasdaq notified the Registrant that the
Registrant is no longer in compliance with the audit committee composition and
certification of audit committee requirements, as set forth in Nasdaq
Marketplace Rule 4350(d)(2), due to the fact that there was a vacancy on the
Audit Committee as of October 31, 2004, the date on which the Registrant was
required to certify such compliance. The Registrant certified such compliance in
reliance on the cure period provided by Nasdaq Marketplace Rule 4350(d)(4). It
is the position of the Nasdaq Staff that the cure period is not available to
issuers who have not yet held their 2004 annual meeting. The Registrant
disagrees with Nasdaq's interpretation and, at Nasdaq's invitation, intends to
submit a written response to the Nasdaq Listing Qualifications Panel no later
than November 18, 2004.

         In light of the election of Samuel M. Zentman to the Board of
Directors and his appointment to the Audit Committee as described in Item 5.02
below, the Registrant believes that it is now in full compliance with Nasdaq
Marketplace Rule 4350(d)(2).

         On November 12, 2004, the Registrant informed Nasdaq that its
shareholders' equity as of September 30, 2004 had fallen below the minimum level
required for continued listing on The Nasdaq Small Cap Market. On November 16,
2004, Nasdaq notified the Registrant that the Registrant is no longer in
compliance with the shareholders' equity/market value of listed securities/net
income requirement, as set forth in Nasdaq Marketplace Rule 4310(c)(2)(B). The
Registrant intends to submit a written response to the Nasdaq Listing
Qualifications Panel no later than November 23, 2004 describing its plan for
regaining and maintaining compliance with this rule.

Section 5 - Corporate Governance Management

Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.

         On November 16, 2004 the Registrant's Board of Directors elected Samuel
M. Zentman to serve as a member of the Board of Directors. Dr. Zentman was also
appointed to serve as an additional independent director on the Audit Committee
of the Board of Directors.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

Exhibits

99.1 Press release of Registrant dated November 12, 2004


                                       2
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on this 17th day of November, 2004.

                                DATA SYSTEMS & SOFTWARE, INC.

                                By: /s/ GEORGE MORGENSTERN
                                    -------------------------------------------
                                Name:  George Morgenstern
                                Title:  President and Chief Executive Officer

                                       3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>v08981_ex99-1.txt
<TEXT>

FOR IMMEDIATE RELEASE

CONTACT:

George Morgenstern, CEO
DATA SYSTEMS & SOFTWARE INC.
(201) 529-2026 E-mail: ir@dssiinc.com

                     DATA SYSTEMS & SOFTWARE INC. ANNOUNCES
     RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2004

Mahwah, New Jersey -November 12, 2004 -- Data Systems & Software Inc. (NASDAQ:
DSSI) today announced results for the quarter and nine months ended September
30, 2004.

         The decrease in sales in the first nine months of 2004, as compared to
the same period in 2003, was due the inclusion of Comverge's sales of $4.7
million in the first quarter of 2003; commencing the second quarter of 2003 the
Company no longer consolidated Comverge's operations. The increase in sales in
the third quarter of 2004 was due to a $1 million increase in computer hardware
sales, which was partially offset by a $0.1 million decrease in software
consulting and development sales. The increase in computer hardware sales was
primarily from increased sales to Databit's existing customers. The decrease in
software consulting and development sales was due a decrease in development
project revenues.
         The decrease in gross profits in the first nine months of 2004 as
compared to the same period in 2003, was attributable to the inclusion of
Comverge's gross profit of $1.3 million in the first quarter of 2003. This
decrease was net of an increase in gross profit in both of the Company's
consolidated segments. In the third quarter of 2004, gross profit and gross
profit margins increased in both operating segments compared to the third
quarter of 2003.
         The decrease in SMG&A in the first nine months of 2004, as compared to
SMG&A in the first nine months of 2003, is attributable to the fact that the
2003 period included $2.2 million of Comverge's SMG&A and since the second
quarter of 2003, we no longer consolidate Comverge's operations. The remaining
decrease in SMG&A was also due to decreased corporate G&A and a decrease in
SMG&A in our software consulting and development segment. The increase in SMG&A
in the third quarter of 2004 as compared to third quarter of 2003 was primarily
due to costs associated with the Company's contemplated transaction with Kardan,
which was discontinued by Kardan in the third quarter of 2004. The equity loss
in the third quarter and first nine months of 2004 was attributable to DSSI's
Comverge investment, which the Company accounts for on an equity basis
commencing the second quarter of 2003. DSSI's share of Comverge's net loss of
$2.7 million and $6.9 million in the third quarter and first nine months of 2004
was $0.4 million and $1.1 million, respectively. Comverge's increased loss in
both of the 2004 periods was primarily due to increased SMG&A expenses, which
was primarily attributable to the marketing expenses associated with its new VPC
programs and the deferral into the fourth quarter and future periods of certain
revenues pending the completion of certain tests related to these programs.

         In addition, during the third quarter of 2004, DSSI sold a portion of
its investment in Comverge, resulting in income of approximately $0.7 million.

         As of September 30, 2004 DSSI's shareholders' equity was $2.3 million,
$0.2 million short of the $2.5 million minimum required for continued listing on
the Nasdaq SmallCap Market. As a result, DSSI's securities may be delisted from
The Nasdaq Stock Market. The Company intends to present to Nasdaq its plan for
regaining and maintaining compliance with the minimum shareholders equity
requirement.
<PAGE>

         George Morgenstern, Chairman and Chief Executive Officer of DSSI
commented: "We congratulate Comverge on its successful raising of $13.6 million
in its most recent equity financing round. This is an additional vote of
confidence by both its current and new shareholders in Comverge's business model
and future. However, due to expenses associated with its VPC contracts and
deferral of certain revenues into Q4 and future periods, our equity losses in
Comverge continue to be the primary source of our net loss." Mr. Morgenstern
added: "We are continuing to explore various alternatives to increase our
shareholders equity and enhance value to our shareholders over the long term."

         DSSI is a provider of software consulting and development services, and
is an authorized direct seller and value added reseller of computer hardware. In
addition, its Comverge Inc. affiliate provides energy intelligence solutions to
utilities. For more information, contact: George Morgenstern, CEO, (201)
529-2026, ir@dssiinc.com.

This press release includes forward-looking statements, which are subject to
risks and uncertainties, including risks associated with (i) successful
implementation of the Company's plan for financing its operations over the next
12 months, (ii) conditions in the computer hardware and IT solutions markets,
and (iii) the Company's business generally. The Company may require additional
liquidity to finance its US-based operating and corporate activities over the
next 12 months. The Company is considering alternatives to increase
shareholders' equity, provide additional liquidity for its operations and
enhance shareholder value, including possible restructuring, merger or
acquisition and/or financing transactions. There is no assurance that the
Company will be able to complete such a transaction on a timely basis. There is
no assurance that the Company will be able to regain and maintain the minimum
shareholders equity required for continued listing on The Nasdaq Stock Market.
Actual results may vary from those projected or implied by forward-looking
statements in this release. A more complete discussion of risks and
uncertainties which may affect the accuracy of these statements and the
Company's business generally is included in "Business--Factors Which May Affect
Future Results" in the Company's most recent Annual Report on Form 10-K as filed
by the Company with the Securities and Exchange Commission.

                                  Tables Follow
<PAGE>

                  DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                              As of
                                      ASSETS                                       As of December 31       September 30
                                                                                     -------------         -------------
<S>                                                                                  <C>                   <C>
Current assets:                                                                                             (unaudited)
     Cash and cash equivalents ..............................................        $       1,213         $         896
     Restricted cash ........................................................                  241                   241
     Accounts receivable, net ...............................................                7,053                 6,361
     Inventory ..............................................................                   88                    87
     Other current assets ...................................................                  661                   768
                                                                                     -------------         -------------
         Total current assets ...............................................                9,256                 8,353
                                                                                     -------------         -------------
Investment in Comverge, net .................................................                   68
Property and equipment, net .................................................                  814                   677
Other assets ................................................................                  613                   540
Funds in respect of employee termination benefits ...........................                2,379                 2,636
Goodwill ....................................................................                4,430                 4,236
Other intangible assets, net ................................................                  114                    85
                                                                                     -------------         -------------
         Total assets .......................................................        $      17,674         $      16,527
                                                                                     =============         =============

                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Short-term bank credit and current maturities of long-term debt ........        $       1,517         $       1,394
     Trade accounts payable .................................................                2,586                 2,315
     Accrued payroll, payroll taxes and social benefits .....................                1,451                 1,431
     Other current liabilities ..............................................                2,973                 2,064
                                                                                     -------------         -------------
         Total current liabilities ..........................................                8,527                 7,204
                                                                                     -------------         -------------
                                                                                                                   1,268
Investment in Comverge, net .................................................                   --
                                                                                     -------------         -------------
Long-term liabilities:
     Long-term debt .........................................................                  632                   241
     Other liabilities ......................................................                  227                    84
     Liability for employee termination benefits ............................                3,721                 4,088
                                                                                     -------------         -------------
            Total long-term liabilities .....................................                4,580                 4,413
                                                                                     -------------         -------------
Minority interests ..........................................................                1,367                 1,351
                                                                                     -------------         -------------
Shareholders' equity:
     Common stock - $0.01 par value per share:
         Authorized - 20,000,000 shares;
         Issued - 8,740,729 and 8,842,395 shares as of
            December 31, 2003 and September 30, 2004, respectively ..........                   87                    88
     Additional paid-in capital .............................................               39,595                39,685
     Warrants ...............................................................                  461                   461
     Stock-based deferred compensation ......................................                   --                   (64)
     Accumulated deficit ....................................................              (33,069)              (33,929)
Treasury stock, at cost - 838,704 and 820,704 shares at December 31, 2003 and
         June 30, 2004, respectively ........................................               (3,874)               (3,791)
     Accumulated other comprehensive loss ...................................                   --                  (159)
                                                                                     -------------         -------------
         Total shareholders' equity .........................................                3,200                 2,291
                                                                                     -------------         -------------
         Total liabilities and shareholders' equity .........................        $      17,674         $      16,527
                                                                                     =============         =============
</TABLE>

<PAGE>

                  DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
                      Consolidated Statements Of Operations
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                          Nine months ended      Three months ended
                                                                            September 30,          September 30,
                                                                        --------------------    --------------------
                                                                          2003        2004       2003        2004
                                                                        --------    --------    --------    --------
<S>                                                                     <C>         <C>         <C>         <C>
Sales:
     Products .......................................................   $ 16,900    $ 13,157    $  3,779    $  4,764
     Services .......................................................      7,306       6,831       2,327       2,141
     Projects .......................................................      2,459       2,049         564         577
                                                                        --------    --------    --------    --------
           Total sales ..............................................     26,665      22,037       6,670       7,482
                                                                        --------    --------    --------    --------
Cost of sales:
     Products .......................................................     13,951      10,801       3,202       3,887
     Services .......................................................      5,082       5,049       1,665       1,670
     Projects .......................................................      2,087       1,655         601         469
                                                                        --------    --------    --------    --------
           Total cost of sales ......................................     21,120      17,505       5,468       6,026
                                                                        --------    --------    --------    --------
     Gross profit ...................................................      5,545       4,532       1,202       1,456

   Research and development expenses ................................        153          --          --          --
   Selling, marketing, general and administrative expenses ..........      8,345       5,496       1,982       2,168
                                                                        --------    --------    --------    --------
                                                                          (2,953)       (964)       (780)       (712)
Operating loss
Interest income .....................................................         42          79          15           2
Interest expense ....................................................       (714)       (125)        (68)        (39)
Other income (expense), net .........................................       (408)        239        (243)          2
                                                                        --------    --------    --------    --------
     Loss before taxes on income ....................................     (4,033)       (771)     (1,076)       (747)
Taxes on income .....................................................          7          17         (27)         37
                                                                        --------    --------    --------    --------
Loss from operations of the Company and its consolidated subsidiaries     (4,040)       (788)     (1,049)       (784)
Share of losses in Comverge .........................................     (1,161)     (1,066)       (611)       (382)
Gain on sale of shares in Comverge ..................................         --         705          --         705
Minority interests ..................................................        139         (59)         35         (11)
                                                                        --------    --------    --------    --------
       Net loss from continuing operations ..........................     (5,062)     (1,208)     (1,625)       (472)
Net income (loss) from discontinued operations, net of tax ..........        (38)        348          (4)         --
                                                                        --------    --------    --------    --------
       Net loss .....................................................     (5,100)       (860)     (1,629)       (472)
                                                                        --------    --------    --------    --------

Differences from translation of financial statements of subsidiaries          --        (159)         --          11
                                                                        --------    --------    --------    --------
       Comprehensive loss ...........................................   $ (5,100)   $ (1,019)   $ (1,629)   $   (461)
                                                                        ========    ========    ========    ========

Basic and diluted net income (loss) per share:
  Loss per share from continuing operations .........................   $  (0.66)   $  (0.15)   $  (0.21)   $  (0.06)
  Discontinued operations ...........................................         --          --        0.00          --
                                                                        --------    --------    --------    --------
  Basic and diluted net income (loss) per share .....................   $  (0.66)   $  (0.11)   $  (0.21)   $  (0.06)
                                                                        ========    ========    ========    ========
Weighted average number of shares outstanding:
        Basic and diluted ...........................................      7,680       7,927       7,894       7,936
                                                                        ========    ========    ========    ========
</TABLE>


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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