SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1
ON
FORM 8-K/A
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 18, 2005
DATA SYSTEMS & SOFTWARE INC.
(Exact name of Registrant as Specified in its Charter)
Delaware 0-19771 22-2786081
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
200 Route 17, Mahwah, New Jersey 07430
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(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))
Section 2 - Financial Information
Item 2.01 Completion of Acquisition or Disposition of Assets.
On August 18, 2005, the Registrant closed a transaction effecting the sale of
the outsourcing consulting business of the Registrant's subsidiary, dsIT
Technologies Ltd., to Taldor Computer Systems (1986) Ltd. The operations which
were sold are comprised of dsIT's business of providing computer software and
systems professionals on a time and materials basis to clients in Israel. The
sale was made pursuant to the previously announced definitive agreement entered
into between Taldor and the dsIT Technologies shareholders on July 27, 2005.
Prior to the consummation of the sale, dsIT Technologies completed a spin-off of
its project development and solutions activities to certain of its current
shareholders. The Registrant owns 80% of the entity, which will continue to
conduct these activities. Under the terms of the purchase agreement, at the
closing Taldor received a warrant to purchase 10% of this entity.
The transaction was structured as a sale to Taldor of all the shares of dsIT
Technologies. The terms of the sale provide for an aggregate purchase price $6.0
million, of which approximately $5.65 was paid in cash and the balance by the
transfer of dsIT Technologies net liabilities. Approximately $0.5 million of the
cash consideration was placed in escrow and will be released to the sellers if
and to the extent certain conditions set forth in the agreement are met.
At the closing, the Registrant received approximately $3.5 million as its share
of the gross proceeds paid at closing.
This Amendment No.1 on Form 8-K/A to the Registrant's Current Report on Form 8-K
filed on August 24, 2005 is being filed to provide pro forma financial
information.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
See unaudited pro forma condensed consolidated financial information
attached hereto.
(c) Exhibits.
99.1 Share Purchase Agreement by and among Data Systems & Software Inc.,
Kardan Communication Ltd., Neuwirth Investments Ltd., Meir Givon,
dsIT Technologies Ltd. and Taldor Computer Systems (1986) Ltd. dated
as of July 27, 2005. (previously filed)
99.2 Warrant Certificate of Endan IT Solutions Ltd. (previously filed)
99.3 Unconditional Guaranty of Endan IT Solutions Ltd. dated as of July
26, 2005. (previously filed)
2
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 8th day of September 2005.
DATA SYSTEMS & SOFTWARE INC.
By: /S/ GEORGE MORGENSTERN
-------------------------------------
Name: George Morgenstern
Title: President and Chief Executive Officer
3
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
The following unaudited pro forma condensed consolidated financial statements
give effect to the sale by Data Systems & Software Inc. (the "Company" or
"DSSI") of the outsourcing consulting business of its dsIT Technologies Ltd.
subsidiary ("dsIT Technologies") to Taldor Computer Systems (1986) Ltd.
("Taldor") on August 18, 2005 (the "Disposition").
Prior to the consummation of the Disposition, dsIT Technologies completed a
spin-off of its project development and solutions activities to certain of its
current shareholders. DSSI owns 80% of the entity, which will continue to
conduct these activities under the name dsIT Solutions Ltd.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet (the "Pro Forma
Balance Sheet") as of June 30, 2005 has been prepared as if the Disposition
occurred on June 30, 2005. The Pro Forma Balance Sheet is based upon the
historical consolidated balance sheet of DSSI as of June 30, 2005, which was
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005, and gives effect to the unaudited pro forma adjustments necessary
to account for the Disposition.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 2004 (the "Annual Pro Forma Statement of Operations")
has been prepared as if the Disposition occurred on January 1, 2004. This Annual
Pro Forma Statement of Operations is based upon the historical consolidated
statement of operations of DSSI for the year ended December 31, 2004, which was
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2004, and gives effect to the unaudited pro forma adjustments necessary to
account for the Disposition. The Annual Pro Forma Statement of Operations does
not include the anticipated gain on the Disposition of approximately $323, net
of taxes.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
six-month period ended June 30, 2005 (the "Six-Month Period Pro Forma Statement
of Operations") has been prepared as if the Disposition occurred on January 1,
2005. This Six-Month Period Pro Forma Statement of Operations is based upon the
historical consolidated statement of operations of DSSI for the six-month period
ended June 30, 2005, which was included in the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2005, and gives effect to the unaudited
pro forma adjustments necessary to account for the Disposition. The Six-Month
Period Pro Forma Statement of Operations does not include the anticipated gain
on the Disposition of approximately $323, net of taxes.
The unaudited pro forma adjustments are based on an estimated sale price and
assumptions that DSSI believes are reasonable. Therefore, the amounts in the Pro
Forma Statements of Operations and Pro Forma Balance Sheet and accompanying
notes (collectively, the "Pro Forma Financial Information") are subject to
change. The Pro Forma Financial Information is provided for illustrative
purposes only and does not purport to represent what DSSI's results of
operations or financial position would actually have been, had the Disposition
in fact occurred on such dates, nor does it purport to project the results of
operations or financial position of DSSI for any future period or date.
The Pro Forma Financial Information should be read in conjunction with, and is
qualified by reference to, the audited and unaudited financial statements and
accompanying notes of DSSI, which were included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2004 and Quarterly Report on Form
10-Q for the quarter ended June 30, 2005.
4
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
As of June 30, 2005
Business
DSSI as disposition Pro forma
reported (Notes 1 and 2) adjustments Notes Pro forma
---------- ------------ ------------ ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents .............. $ 265 3,318 (1,441) 7,8 $ 2,142
Investment in short-term restricted
deposits ............................... -- 300 7 300
Restricted cash ........................ 352 (109) 243
Accounts receivable, net ............... 6,021 (1,540) 4,481
Unbilled work-in-process ............... 588 (127) 461
Inventory .............................. 63 63
Other current assets ................... 610 (103) (38) 6 469
---------- ----------
Total current assets ............. 7,899 8,159
Property and equipment, net ............ 598 598
Other assets ........................... 730 (91) (262) 6 377
Long-term restricted deposits .......... -- 1,141 7 1,141
Funds in respect of employee
termination benefits ................... 2,748 (972) 1,776
Goodwill ............................... 4,151 (4,022) 129
Other intangible assets, net ........... 61 61
---------- ----------
Total assets ..................... $ 16,187 $ 12,241
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank credit ................. $ 858 (398) $ 460
Current maturities of
long-term debt ......................... 401 (3) 398
Related Party - Note payable ........... 100 100
Trade accounts payable ................. 2,147 (243) 1,904
Accrued payroll, payroll
taxes and social benefits .............. 1,715 (985) 730
Other current liabilities .............. 2,326 (220) 2,106
---------- ----------
Total current liabilities ........ 7,547 5,698
---------- ----------
Long-term liabilities:
Investment in Comverge, net ............ 1,824 1,824
Long-term debt ......................... 166 166
Liability for employee
termination benefits.................... 4,270 (1,428) 2,842
Other liabilities....................... 21 21
---------- ----------
Total long-term liabilities ............ 6,281 4,853
---------- ----------
Minority interests...................... 1,437 (1,437) 5 --
---------- ----------
Shareholders' equity:
Common stock - $0.01 par
value per share:
Authorized - 20,000,000 shares;
Issued - 8,937,395 shares at
December 31, 2004 and June 30, 2005 .... 88 88
Additional paid-in capital ............. 39,733 335 40,068
Warrants ............................... 461 461
Deferred compensation................... (47) (47)
Accumulated deficit..................... (35,303) 544 (300) 6 (35,059)
Treasury stock, at cost - 820,704
shares at December 31, 2004 and
June 30, 2005 .......................... (3,791) (3,791)
Accumulated other
comprehensive loss ..................... (219) 189 (30)
---------- ----------
Total shareholders' equity ....... 922 1,690
---------- ----------
Total liabilities and
shareholders' equity ............. $ 16,187 $ 12,241
========== ==========
5
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004
(in thousands, except net loss per share data)
Business
disposition Pro forma
DSSI (Notes 1 and 3) adjustments Notes Pro forma
---------- ------------ ------------ ----------- ----------
Sales .................................. $ 30,113 $ (8,273) $ 21,840
Cost of sales .......................... 23,587 (6,344) 17,243
---------- ------------ ----------
Gross profit ..................... 6,526 (1,929) 4,597
Research and development expenses ...... 30 -- 30
Selling, marketing, general and
administrative expenses ................ 7,369 (260) 7,109
---------- ------------ ----------
Total operating expenses ......... 7,399 (260) 7,139
---------- ------------ ----------
Operating loss ......................... (873) (1,669) (2,542)
Interest income ........................ 84 18 8 102
Interest expense ....................... (175) (175)
Other income (expense), net ............ 197 (51) 5 146
---------- ------------ ------------ ----------
Loss before taxes on income ...... (767) (1,669) (33) (2,469)
Taxes on income ........................ 126 327 6 453
---------- ------------ ------------ ----------
Loss from operations of the Company
and its consolidated subsidiaries ...... (893) (1,669) (360) (2,922)
Share in losses of Comverge ............ (1,242) (1,242)
Gain on sale of shares in Comverge ..... 705 705
Minority interests ..................... (90) 90 5 --
---------- ------------ ------------ ----------
Net loss ......................... (1,520) (1,669) (270) (3,459)
========== ============ ============ ==========
Basic and diluted net loss per share:
Loss per share ......................... $ (0.19) $ (0.43)
========== ==========
Weighted average number of shares
outstanding - basic and diluted ........ 7,976 7,976
========== ==========
6
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2005
(in thousands, except loss per share data)
Business
disposition Pro forma
DSSI (Notes 1 and 4) adjustments Notes Pro forma
---------- ------------ ------------ ----------- ----------
Sales .................................. $ 15,657 (4,303) $ 11,354
Cost of sales .......................... 12,420 (3,388) 9,032
---------- ------------ ----------
Gross profit ..................... 3,237 (915) 2,322
Research and development expenses ...... 26 26
Selling, marketing, general and
administrative expenses ................ 3,614 (84) 3,530
---------- ------------ ----------
Total operating expenses.......... 3,640 (84) 3,556
---------- ------------ ----------
Operating loss ......................... (403) (831) (1,234)
Interest income......................... 4 10 8 14
Interest expense........................ (98) (98)
Other income (expense), net............. 60 (62) 5 (2)
---------- ------------ ------------ ----------
Loss before taxes on income ....... (437) (831) (52) (1,320)
Taxes on income ........................ 137 301 6 438
---------- ------------ ------------ ----------
Loss from operations of the Company and
its consolidated subsidiaries........... (574) (831) (353) (1,758)
Share in losses of Comverge............. (380) (380)
Minority interests...................... (59) 59 5 --
---------- ------------ ------------ ----------
Net loss ......................... (1,013) (831) (294) (2,138)
========== ============ ============ ==========
Basic and diluted net loss per share:
---------- ----------
Loss per share.......................... $ (0.12) $ (0.26)
========== ==========
Weighted average number of shares
outstanding - basic and diluted......... 8,117 8,117
========== ==========
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DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands, except share and per share data)
NOTE 1
To record the Disposition resulting in estimated proceeds to DSSI of $3,318, net
of estimated expenses of $200 ($150 of transaction expenses and $50 of tax). As
a result of the transaction, goodwill, minority interest and accumulated other
comprehensive loss balances associated with dsIT Technologies are accordingly
adjusted.
NOTE 2
To record the reduction of assets and liabilities in the spin-off of dsIT
Technologies' project development and solutions activities as follows:
Assets
------
Restricted cash $ (109)
Accounts receivable, net (1,540)
Unbilled work-in-process (127)
Other current assets (103)
Other assets (91)
Funds in respect of employee termination
benefits (972)
-----------
Reduction in total assets (2,942)
===========
Liabilities
-----------
Short-term bank credit (398)
Current maturities of long-term debt (3)
Trade accounts payable (243)
Accrued payroll, payroll taxes and social
benefits (985)
Other current liabilities (220)
Liability for employee termination benefits (1,428)
-----------
Reduction in total liabilities (3,277)
===========
Excess of liabilities over assets - to
additional paid-in-capital 335
===========
8
NOTE 3
To record the exclusion of dsIT Technologies' outsourcing consulting business
activities for the period from January 1, 2004 to December 31, 2004 as follows:
Sales $ 8,273
Cost of sales 6,344
-----------
Gross profit 1,929
Selling, marketing, general and
administrative 260
-----------
Operating income $ 1,669
NOTE 4
To record the exclusion of dsIT Technologies' outsourcing consulting business
activities for the period from January 1, 2005 to June 30, 2005 as follows:
Sales $ 4,303
Cost of sales 3,388
-----------
Gross profit 915
Selling, marketing, general and
administrative 84
-----------
Operating income $ 831
NOTE 5
To adjust for the recording of minority interests' share of income/losses in
dsIT Solutions. As a result of the transaction, there is no longer a minority
interest participation in dsIT Solutions' income/losses. DSSI records the full
amount of dsIT Solutions' losses with no adjustment for minority interests.
NOTE 6
To expense all deferred tax assets in dsIT Solutions.
NOTE 7
To record the funding of the present value of the remaining balance of the
consulting agreement of the Company's Chief Executive Officer in accordance with
the Company's agreement with him dated as of January 1, 1997, as amended to
date.
NOTE 8
To record interest income resulting from the investment in short-term and
long-term deposits of the remaining balance of cash remaining from the
Disposition after the funding of the Company's Chief Executive Officer's
consulting agreement.
NOTE 9
As part of the Disposition, DSSI granted to Taldor warrants to purchase 10% of
dsIT Solutions Ltd. for $200. The warrants have a seven-year life and expire on
August 18, 2012. The value of such warrants is immaterial.
9