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<SEC-DOCUMENT>0001144204-05-026189.txt : 20050818
<SEC-HEADER>0001144204-05-026189.hdr.sgml : 20050818
<ACCEPTANCE-DATETIME>20050818114830
ACCESSION NUMBER:		0001144204-05-026189
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20050812
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20050818
DATE AS OF CHANGE:		20050818

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:		051035083

	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>v024296.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) August 12, 2005


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


          Delaware                       0-19771                22-2786081
       ----------------------------------------------------------------------
(State or Other Jurisdiction   (Commission file Number)     (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 August 12, 2005, the Registrant announced its financial results for
the second quarter and six months ended June 30, 2005. The press release
relating to such announcement is filed as Exhibit 99.1 hereto.


Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c)      Exhibits

         99.1     Press Release dated August 12, 2005 announcing the financial
                  results.
<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 August 2005.


                                  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>v024296_exh99-1.txt
<TEXT>

                                                                    EXHIBIT 99.1
[LOGO]

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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2005

Mahwah, New Jersey - August 12, 2005 -- Data Systems & Software Inc. (OTCBB:
DSSI) today announced results for the quarter and six months ended June 30,
2005.

      Sales in the first six months of 2005 increased by $1.1 million, from
$14.6 million in the first six months of 2004 to $15.7 million in the first six
months of 2005. This increase was due to increased sales in both segments,
particularly in the first quarter of this year. Sales in the second quarter of
2005 decreased in comparison to those in the second quarter of 2004. The
decrease in sales was due to a $0.5 million decrease in computer hardware sales,
partially offset by a $0.3 million increase in software consulting and
development sales.

         Gross profit in the first six months of 2005 increased by $0.2 million
compared to the first six months of 2004, due to increased gross profit in both
segments in the first quarter of this year. Gross profit in the second quarter
of 2005 decreased by $0.1 million in comparison to the second quarter of 2004,
due a decrease in gross profit in the Company's computer hardware segment.

         Selling, marketing, general and administrative expenses in the first
six months and second quarter of 2005 increased by $0.3 million and $0.2
million, respectively, as compared to the same periods in 2004. The increase was
due to increased compensation expenses and professional fees. Although the
Company expects this increased level of expense to continue in the third
quarter, they are expected to decrease significantly in the fourth quarter of
this year with the closing of the transaction for the sale of dsIT's outsourcing
consulting business.

         The Company's share of Comverge's net loss of $6.1 million for the
first six months and $3.0 million for the second quarter of 2005 was $0.4
million and $0.2 million, respectively. As the carrying value of the Company's
investment in Comverge's common stock and preferred stock has been reduced to
zero, the Company will no longer be recording equity losses in Comverge.

         On July 27, 2005, the Company and the other shareholders of dsIT
entered into a definitive agreement for the sale of dsIT's outsourcing
consulting business to Taldor Computer Systems (1986) Ltd. (TASE: TALD) for
approximately $6 million in cash. The price is subject to adjustment under the
terms set forth in the agreement. The Company's net share of the purchase price
is expected to be approximately $3.5 million. The closing of the transaction is
subject to consents and approvals, including approval of various Israeli
government authorities, dsIT's banks and certain other parties.

         Mr. George Morgenstern, President and CEO of DSSI commented: "The
results in the second quarter suffered from the volatile nature of the computer
hardware market and a decrease in consulting sales, due in part to dsIT being in
flux as a result of the pending sale of this business. We are close to
completing the sale of dsIT's consulting outsourcing business. We believe our
increased focus on dsIT's project and solution business, which the company will
be retaining, will allow us to better leverage our expertise and reputation in
developing and marketing solutions in the defense, homeland security and
commercial areas."

         Data Systems & Software Inc. (OTCBB: 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. equity
affiliate provides energy intelligence solutions to utilities. Additional
information about DSSI is available at www.dssiinc.com.

This press release includes forward-looking statements, which are subject to
risks and uncertainties. Actual results may vary from those projected or implied
by such forward-looking statements. The ability of the Company to maintain
profitable operations in its consolidated operating segments is subject to risks
and uncertainties related to conditions in the market for computer hardware and
the projects and solutions markets. The closing of the sale of dsIT's
outsourcing consulting business is subject to the receipt of all necessary
corporate and other approvals. The actual consideration to be paid for the dsIT
shares, and the amount that the Company may receive in connection with the
transaction, is subject to adjustment. There is no assurance that the
transaction will be consummated on the terms previously announced or at all. The
Company's ability to leverage its experience and reputation in the projects and
solutions markets is subject to many risks and uncertainties, and there is no
assurance that the Company will be able to do so. 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      As of
                                                                                    December    June 30,
                                      ASSETS                                        31, 2004     2005
                                                                                   --------    --------
Current assets:                                                                               (unaudited)
<S>                                                                                <C>         <C>
     Cash and cash equivalents                                                     $    685    $    265
     Short-term bank deposits                                                            72          --
     Restricted cash                                                                    354         352
     Accounts receivable, net                                                         6,069       6,021
     Unbilled work-in-process                                                           533         588
     Inventory                                                                           61          63
     Other current assets                                                               540         610
                                                                                   --------    --------
         Total current assets                                                         8,314       7,899
Property and equipment, net                                                             649         598
Other assets                                                                            737         730
Funds in respect of employee termination benefits                                     2,836       2,748
Goodwill                                                                              4,408       4,151
Other intangible assets, net                                                             81          61
                                                                                   --------    --------
         Total assets                                                              $ 17,025    $ 16,187
                                                                                   ========    ========

                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Short-term bank credit                                                        $    729    $    858
     Current maturities of long-term debt                                               466         401
     Note payable - related party                                                        --         100
     Trade accounts payable - related party                                           2,283       2,147
     Accrued payroll, payroll taxes and social benefits                               1,735       1,715
     Other current liabilities                                                        2,227       2,326
                                                                                   --------    --------
         Total current liabilities                                                    7,440       7,547
                                                                                   --------    --------
Long-term liabilities:
     Investment in Comverge, net                                                      1,444       1,824
     Long-term debt                                                                     201         166
     Liability for employee termination benefits                                      4,279       4,270
     Other liabilities                                                                   65          21
                                                                                   --------    --------
            Total long-term liabilities                                               5,989       6,281
                                                                                   --------    --------
Minority interests                                                                    1,471       1,437
                                                                                   --------    --------
Shareholders' equity:
     Common stock - $0.01 par value per share:
      Authorized - 20,000,000 shares; Issued - 8,937,395 shares at                       88
            December 31, 2004 and June 30, 2005                                          88
     Additional paid-in capital                                                      39,733      39,733
     Warrants                                                                           461         461
     Deferred compensation                                                              (59)        (47)
     Accumulated deficit                                                            (34,290)    (35,303)
      Treasury stock, at cost -820,704 shares at December 31, 2004 and June 30,      (3,791)
         2005                                                                        (3,791)
     Accumulated other comprehensive loss                                               (17)       (219)
                                                                                   --------    --------
         Total shareholders' equity                                                   2,125         922
                                                                                   --------    --------
         Total liabilities and shareholders' equity                                $ 17,025    $ 16,187
                                                                                   ========    ========
</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                                        Six months ended              Three months ended
                                                              June 30,                     June 30,
                                                   ---------------------------     ------------------------
                                                       2004           2005             2004        2005
                                                   -------------  ------------     -----------   ----------
Sales:
<S>                                               <C>             <C>              <C>           <C>
Products                                             $8,156          $9,053          $  4,123    $  3,925
Services                                              4,927           4,947             2,467       2,359
Projects                                              1,472           1,657               710         814
                                                   --------        --------          --------    --------
           Total sales                               14,555          15,657             7,300       7,098
                                                   --------        --------          --------    --------
Cost of sales:
Products                                              6,914           7,422             3,549       3,237
Services                                              3,379           3,855             1,684       1,871
Projects                                              1,186           1,143               541         603
                                                   --------        --------          --------    --------
           Total cost of sales                       11,479          12,420             5,774       5,711
                                                   --------        --------          --------    --------
Gross profit                                          3,076           3,237             1,526       1,387
Operating expenses:
   Research and development expenses                     --              26                --          17
   Selling, marketing, general and administrative     3,328           3,614             1,498       1,722
                                                   --------        --------          --------    --------
           Total operating expenses                   3,328           3,640             1,498       1,739
                                                   --------        --------          --------    --------
Operating income (loss)                                (252)           (403)               28        (352)
Interest income                                          77               4                75           2
Interest expense                                        (86)           ( 98)              (29)        (43)
Other income, net                                       237              60               136          55
                                                   --------        --------          --------    --------
Income (loss) before taxes on income                    (24)           (437)              210        (338)
Taxes on income                                         (20)            137               (13)         40
                                                   --------        --------          --------    --------
Income (loss) from operations of the Company and its     (4)           (574)               223       (378)
   consolidated subsidiaries
Share of losses in Comverge                            (684)           (380)              (331)      (179)
Minority interests                                      (48)            (59)               (33)       (17)
                                                   --------        --------          --------    --------
       Net  loss from continuing operations            (736)         (1,013)             (141)       (574)
Net income from discontinued operations,                                                  348          --
   net of tax                                                                             348          --
                                                   --------        --------          --------    --------
       Net income (loss)                               (388)         (1,013)              207        (574)
                                                   --------        --------          --------    --------
Other comprehensive income (loss), net of tax:
Differences from translation of financial
   statements of subsidiaries                          (170)           (202)               26        (161)
                                                   --------        --------          --------    --------
       Comprehensive income (loss)                    $(558)          1,215)         $    233    $   (735)
                                                   ========        ========          ========    ========

Basic and diluted net income (loss) per share:
  Loss per share from continuing operations          $(0 09)         $(0 12)         $  (0 01)   $  (0 07)
  Discontinued operations                               0 04             --              0 04          --
                                                   --------        --------          --------    --------
  Basic and diluted net income (loss) per share      $(0 05)          (0 12)         $   0 03    $  (0 07)
                                                   ========        ========          ========    ========
Weighted average number of shares outstanding:
  Basic and diluted                                   7,918           8,117             7,922       8,117
                                                   ========        ========          ========    ========

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