EX-99.1 2 v043478_ex99-1.htm Unassociated Document
EXHIBIT 99.1



FOR IMMEDIATE RELEASE
 
CONTACT:
 
John A. Moore, CEO
DATA SYSTEMS & SOFTWARE INC.
(201) 529-2026
E-mail: jamoore@dssiinc.com 

DATA SYSTEMS & SOFTWARE INC. ANNOUNCES
RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2006



Mahwah, New Jersey - May 16, 2006 -- Data Systems & Software Inc. (OTCBB: DSSI) today announced results for the quarter ended March 31, 2006.
 
The results as reported reflect the sale in March 2006 of the Company’s Databit Inc. subsidiary and its computer hardware sales business. Under applicable accounting principles, the results of this business have been reclassified in the current period and for all prior periods as a discontinued operation. The condensed results of this business are presented in each of the current and comparative periods as net income from discontinued operations. The Company’s continuing operations consist of its RT Solutions and IT Solutions segments, which are conducted though the Company’s dsIT Solutions Ltd. subsidiary.
 
Sales in the first quarter of 2006 decreased by $186,000, or 16%, from $1,159,000 in the first quarter of 2005 to $973,000 in the first quarter of 2006. The decrease was primarily attributable to a decrease in RT Solutions segment sales due to the substantial completion in fiscal year 2005 of a significant naval sonar project.
 
The decrease in gross profit in the first quarter of 2006 as compared to the first quarter of 2005 was attributable to both the overall decrease in sales and the inclusion in the 2005 period of significant sales from the previously mentioned naval sonar project which had a relatively high gross profit margin.
 
Selling, marketing, general and administrative expenses decreased by $116,000 or 11% as compared to the first three months of 2005. This decrease was due primarily to a reduction in expenses in our dsIT subsidiary. That reduction was partially offset by $116,000 of stock option compensation expense recorded in 2006 with respect to SFAS 123R stock compensation expense recognition.
 
In the first quarter of 2006, the Company reached a settlement agreement with an Israeli bank with respect to its claims against the bank and the bank’s counterclaims. As a result of the settlement agreement the Company recorded other income of $330,000, net of legal expenses.
 
In the first quarter of 2006, the Company recognized $210,000 in previously unrecognized and current losses of its Comverge equity affiliate, offsetting the Company’s additional investment during the quarter in that amount in Comverge preferred stock.
 
The net loss from the Company’s continuing operations was reduced to $588,000 in the first quarter of 2006 from $931,000 in first quarter of 2005.
 
The results for the first quarter of 2005 include the condensed results of Databit as well as the condensed results of the Company’s outsourcing consulting services business in Israel, which was sold in August 2005. The decrease in net income from discontinued operations in the 2006 period as compared to the 2005 period was primarily due to the inclusion in the 2005 period of the results of the outsourcing consulting services business.
 
The first quarter of 2006 results includes a loss of approximately $2.3 million (including $315 of stock compensation expense) from the sale of Databit and the contract settlement with our former CEO.

John A. Moore, President and Chief Executive Officer of DSSI commented: "With the completion of the sale of Databit, management is now focused on helping grow the valuable Comverge Demand Repsonse business and build the port security franchise."
 
About DSSI
Data Systems & Software Inc. (OTCBB: DSSI) is a provider of software consulting and development services. In addition, its Comverge Inc. equity affiliate is a leading Demand Response company enabling utilities, industry and consumers to better manage peak electricity usage. Additional information about DSSI is available at http://www.dssiinc.com and at http://www.dsit.co.il.

About Comverge
Comverge, Inc., The Power in Power Technology(TM), is a leading Demand Response company whose investors include Nth Power, EnerTech Capital, Data Systems & Software Inc., E.ON Venture Partners GmbH, Ridgewood Capital, Easton Hunt Capital Partners, L.P., Norsk Hydro Technology Ventures, Rockport Capital Partners, Partners for Growth, Shell Internet Ventures, an affiliate of the Royal Dutch/Shell Group of Companies, and Air Products and Chemicals, Inc. Providing software and system solutions to over 500 clients in the electric utility industry, Comverge implements both integrated and outsourced solution based models for remote meter reading, distributed generation monitoring, and time-of-use billing and demand response, and direct or voluntary load control initiatives. For additional information about Comverge visit http://www.comverge.com.

This press release includes forward-looking statements, which are subject to risks and uncertainties. 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 real-time and IT solutions market and the market for Demand Response and other energy intelligence solutions. The ability of Comverge to grow and improve its results is subject to risks associated with conditions in the market for Demand Response, including competition and the pace and consequences of deregulation. 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 “Risk Factors” 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
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DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
ASSETS
  
As of December 31, 2005
  
As of March 31, 2006
  
Current assets:
      
(unaudited)
  
Cash and cash equivalents
  
$
913
  
$
834
  
Restricted cash 
    
247
    
--
  
Restricted cash (under agreement with a related party) 
    
300
    
--
  
Accounts receivable, net 
    
4,096
    
898
  
Unbilled work-in-process 
    
348
    
580
  
Inventory 
    
25
    
--
  
Other current assets 
    
709
    
487
  
Total current assets 
    
6,638
    
2,799
  
Property and equipment, net
    
500
    
413
  
Other assets
    
334
    
327
  
Funds in respect of employee termination benefits
    
1,441
    
1,356
  
Restricted cash - non-current (under agreement with a related party)
    
1,050
    
--
  
Goodwill
    
129
    
122
  
Other intangible assets, net
    
81
    
71
  
Total assets
  
$
10,173
  
$
5,088
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
              
Current liabilities:
              
Short-term bank credit  
  
$
130
  
$
78
  
Current maturities of long-term debt 
    
160
    
131
  
Trade accounts payable
    
1,950
    
294
  
Accrued payroll, payroll taxes and social benefits 
    
740
    
411
  
Other current liabilities 
    
2,200
    
1,617
  
Total current liabilities 
    
5,180
    
2,531
  
Long-term liabilities:
              
Investment in Comverge, net
    
1,824
    
1,824
  
Long-term debt 
    
75
    
--
  
Liability for employee termination benefits 
    
2,264
    
2,136
  
Other liabilities 
    
10
    
106
  
Total long-term liabilities 
    
4,173
    
4,066
  
Shareholders’ equity:
              
Common stock - $0.01 par value per share:
              
Auth orized - 20,000 shares; Issued -8,937 shares
at December 31, 2005 and March 31, 2006
    
88
    
89
  
Additional paid-in capital 
    
40,011
    
40,425
  
Warrants 
    
183
    
183
  
Deferred stock-based compensation 
    
(36
)
  
--
  
Accumulated deficit 
    
(35,608
)
  
(38, 576
)
Treasury stock, at cost - 821 and 777 shares
for December 31, 2005 and March 31, 2006, respectively 
    
(3,791
)
  
(3,592
)
Accumulated other comprehensive loss
    
(27
)
  
(38
)
Total shareholders’ equity 
    
820
    
(1,509
)
Total liabilities and shareholders’ equity 
  
$
10,173
  
$
5,088
  

 
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DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
   
Three months ended March 31,
  
   
2005
  
2006
  
Sales
          
Projects 
  
$
844
  
$
730
  
Services and other 
    
315
    
243
  
     
1,159
    
973
  
Cost of sales
             
Projects (including $19 of stock compensation expense in 2006) 
    
537
    
539
  
Services and other 
    
253
    
206
  
     
790
    
745
  
Gross profit 
    
369
    
228
  
Operating expenses:
              
Research and development expenses 
    
9
    
26
  
Selling, marketing, general and administrative expenses (including $6 and $116 of stock compensation expense in 2005 and 2006, respectively) 
    
1,038
    
922
  
Total operating expenses 
    
1,047
    
948
  
Operating loss 
    
(678
)
  
(720
)
Interest income 
    
1
    
25
  
Interest expense 
    
(23
)
  
(10
)
Other income, net 
    
10
    
329
  
Loss before taxes on income 
    
(690
)
  
(376
)
Taxes on income 
    
(2
)
  
(2
)
Loss from operations of the Company and its consolidated subsidiaries 
    
(688
)
  
(378
)
Share in losses of Comverge 
    
(201
)
  
(210
)
Minority interests 
    
(42
)
  
--
  
Net loss from continuing operations 
    
(931
)
  
(588
)
Net income from discontinued operations, net of tax 
    
492
    
78
  
Loss on sale of discontinued operations and contract settlement, net of tax (including $315 of stock compensation expense in 2006)
    
--
    
(2,298
)
Net loss 
  
$
(439
)
$
(2,808
)
Basic and diluted income (loss) per share:
              
Loss per share from continuing operations 
  
$
(0.11
)
$
(0.07
)
Discontinued operations 
    
0.06
    
(0.27
)
Net loss per share - basic and diluted 
  
$
(0.05
)
$
(0.34
)
Weighted average number of shares outstanding - basic and diluted  
    
8,117
    
8,160
  

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