Unassociated Document
UNITED STATES
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) March 10, 2006

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

 
  Delaware
0-19771
22-2786081
(State or Other Jurisdiction
(Commission file Numbers)
(IRS Employer
of Incorporation)
  
Identification Nos.)
 
200 Route 17, Mahwah, New Jersey
07430
(Address of Principal Executive Offices)
(Zip Code)
 
Registrants' 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:

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

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

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

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Item 2.01. Completion of Acquisition or Disposition of Assets
 
On March 10, 2006 the Registrant entered into a Stock Purchase Agreement dated as of March 9, 2006, for the sale of all the outstanding capital stock of its Databit Inc. subsidiary to Shlomie Morgenstern, President of Databit and a former Vice President of the Registrant. The transactions contemplated under the Stock Purchase Agreement, and the related transactions thereto were consummated on March 10, 2006 and are described in the the Registrant’s Current Report on Form 8-K filed on March 17, 2006.

The purpose of this Amendment No. 1 on Form 8-K/A to the Registrant’s Current Report on Form 8-K filed on March 17, 2006 is 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 consolidated financial information attached hereto on pages F-1 to F-5.
 
(d)                  Exhibits  

10.1  
Stock Purchase Agreement dated as of March 9, 2006 by and between Shlomie Morgenstern, Databit Inc., and Data Systems & Software Inc. (previously filed).
10.2  
Termination and Release Agreement dated as of March 9, 2006 by and between Shlomie Morgenstern and Data Systems & Software Inc. (included as Exhibit A to the Stock Purchase Agreement) (previously filed).
10.3  
Amendment Agreement to GM Employment Agreement dated as of March 9, 2006 by and between George Morgenstern and Data Systems & Software Inc. (included as Exhibit B to the Stock Purchase Agreement) (previously filed).
10.4  
Amendment Agreement to Purchaser Option Agreements and Restricted Stock Award Agreement dated as of March 9, 2006 by and between Shlomie Morgenstern and Data Systems & Software Inc. (included as Exhibit C to the Stock Purchase Agreement) (previously filed).
10.5  
Amendment Agreement to GM Option Agreements and Restricted Stock Agreement date March 9, 2006 by and between George Morgenstern and Data Systems & Software Inc. (included as Exhibit D to the Stock Purchase Agreement) (previously filed).
10.6  
Consulting Agreement dated March 9, 2006 by and between George Morgenstern and Data Systems & Software Inc. (included as Exhibit E to the Stock Purchase Agreement) (previously filed).
10.7  
Form of Consent Agreement (included as Exhibit F to the Stock Purchase Agreement) (previously filed).
 
 
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 11th day of May 2006.

 
     
  DATA SYSTEMS & SOFTWARE INC.
 
 		  
 		  
 
  By:   /s/ Michael Barth
 
Name: Michael Barth
  Title: Chief Financial Officer 
 
 
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 

 
The following unaudited pro forma condensed consolidated financial statements give effect to the sale by the Registrant (the “Company”) of its Databit computer hardware business on March 10, 2006, as described in Item 2.01 of this Report on Form 8-K ( “Disposition”).
 
 
The Unaudited Pro Forma Condensed Consolidated Balance Sheet (the "Pro Forma Balance Sheet") as of December 31, 2005 has been prepared as if the Disposition occurred on December 31, 2005. The Pro Forma Balance Sheet is based upon the historical consolidated balance sheet of the Company as of December 31, 2005, which was included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and gives effect to the unaudited pro forma adjustments necessary to account for the Disposition. The Pro Forma Balance Sheet does not include the anticipated loss on the Disposition of approximately $2.3 million, net of taxes with the exception of the $1.5 million of excess of assets over liabilities transferred without consideration.
 
 
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2005 (the "Annual Pro Forma Statement of Operations") has been prepared as if the Disposition occurred on January 1, 2005. This Annual Pro Forma Statement of Operations is based upon the historical consolidated statement of operations of the Company for the year ended December 31, 2005, which was included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, 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 loss on the Disposition of approximately $2.3 million, net of taxes.
 
 
The unaudited pro forma adjustments are based on an estimated sale price and assumptions that the Company 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 the Company’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 the Company 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 the Company, which were included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005.
 
F-1
 
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
 
AS OF DECEMBER 31, 2005
 
(in thousands, except share and per share data)
 
       
Business
              
   
As
  
disposition
  
Pro-forma
         
ASSETS
  
reported
  
 (Note 1)
  
 adjustments
  
Note
  
Pro-forma
  
Current assets:
                      
Cash and cash equivalents 
  
$
913
  
$
(689
)
$
1,350
    
2
  
$
1,574
  
Restricted cash 
    
247
                      
247
  
Restricted cash (under agreement with related party) 
    
300
          
(300
)
  
2
    
--
  
Accounts receivable, net 
    
4,096
    
(2,591
)
              
1,505
  
Unbilled work-in-process 
    
348
                      
348
  
Inventory 
    
25
    
(25
)
              
--
  
Other current assets 
    
709
    
(81
)
              
628
  
    Total current assets 
    
6,638
                      
4,302
  
Property and equipment, net
    
500
    
(39
)
              
461
  
Other assets
    
334
    
(5
)
              
329
  
Restricted cash - non-current
    
1,050
          
(1,050
)
  
2
    
--
  
Funds in respect of employee termination benefits
    
1,441
                      
1,441
  
Goodwill
    
129
                      
129
  
Other intangible assets, net
    
81
                      
81
  
    Total assets 
  
$
10,173
                    
$
6,743
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
Current liabilities:
                                
Short-term bank credit 
  
$
130
                    
$
130
  
Current maturities of long-term debt 
    
160
    
(4
)
              
156
  
Trade accounts payable 
    
1,950
    
(1,454
)
              
496
  
Accrued payroll, payroll taxes and social benefits 
    
740
    
(314
)
              
426
  
Other current liabilities 
    
2,200
    
(121
)
              
2,079
  
    Total current liabilities 
    
5,180
                      
3,287
  
Long-term liabilities:
                                
Investment in Comverge, net 
    
1,824
                      
1,824
  
Long-term debt 
    
75
    
(16
)
              
59
  
Liability for employee termination benefits 
    
2,264
                      
2,264
  
Other liabilities 
    
10
                      
10
  
    Total long-term liabilities 
    
4,173
                      
4,157
  
Shareholders’ equity:
                                
Common stock - $0.01 par value per share:
                                
    Authorized - 20,000,000 shares; Issued - 8,937,395 shares at 
    
 
                      
 
  
    December 31, 2005    
88
                      
88
  
Additional paid-in capital 
    
40,011
                      
40,011
  
Warrants 
    
183
                      
183
  
Deferred compensation 
    
(36
)
                    
(36
)
Accumulated deficit 
    
(35,608
)
  
(1,521
)
              
(37,129
)
    Treasury stock, at cost -820,704 shares at  
    
 
 
                    
 
 
    December 31, 2005    
(3,791
)
                    
(3,791
)
Accumulated other comprehensive income 
    
(27
)
                    
(27
)
    Total shareholders’ equity 
    
820
                      
(701
)
    Total liabilities and shareholders’ equity 
  
$
10,173
                    
$
6,743
  
 
F-2
 
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
 
UNAUDITED PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 
FOR THE YEAR ENDED DECEMBER 31, 2005
 
(in thousands, except  per share data)
   
As
  
Business disposition
      
   
 reported
  
 (Note 3)
  
Pro-forma
  
               
Sales
  
$
21,864
  
$
17,677
  
$
4,187
  
Cost of sales
    
17,446
    
14,501
    
2,945
  
    Gross profit
    
4,418
    
3,176
    
1,242
  
                     
Research and development expenses
    
53
          
53
  
Selling, marketing, general and administrative expenses
    
6,543
    
3,126
    
3,417
  
    Total operating expenses 
    
6,596
    
3,126
    
3,470
  
Operating income (loss) 
    
(2,178
)
  
50
    
(2,228
)
Interest income 
    
29
          
29
  
Interest expense 
    
(99
)
  
(5
)
  
(94
)
Other income (expense), net 
    
6
          
6
  
    Income (loss) before taxes on income
    
(2,242
)
  
45
    
(2,287
)
Taxes on income 
    
(38
)
  
(1
)
  
(37
)
Loss from operations of the Company and its consolidated subsidiaries 
    
(2,204
)
  
46
    
(2,250
)
Share in losses of Comverge 
    
(380
)
        
(380
)
Minority interests 
    
(73
)
        
(73
)
    Net loss from continuing operations 
    
(2,657
)
  
46
    
(2,703
)
Gain on sale of discontinued operations, net of tax 
    
541
          
541
  
Net income from discontinued operations, net of tax 
    
798
          
798
  
    Net Income (loss) 
  
$
(1,318
)
$
46
  
$
(1,364
)
                     
Basic and diluted net loss per share:
    
             
Loss from continuing operations 
  
$
(0.32
)
      
$
(0.33
)
Discontinued operations 
    
0.16
          
0.16
  
Net loss per share 
  
$
(0.16
)
      
$
(0.17
)
Weighted average number of shares outstanding - basic and diluted 
    
8,117
          
8,117
  
 
F-3
 
DATA SYSTEMS AND SOFTWARE INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 
(in thousands)
 
NOTE 1
 
To record the reduction of assets and liabilities in the sale of Databit as follows:
 
Assets
      
Cash
  
$
(689
)
Accounts receivable, net
    
(2,591
)
Inventory
    
(25
)
Other current assets
    
(81
)
Property and equipment, net
    
(39
)
Other assets
    
(5
)
    Reduction in total assets
  
$
(3,430
)
Liabilities
        
Current maturities of long-term debt
    
(4
)
Trade accounts payable
    
(1,454
)
Accrued payroll, payroll taxes and social benefits
    
(314
)
Other current liabilities
    
(121
)
Long-term debt
    
(16
)
    Reduction in total liabilities
  
$
(1,909
)
Excess of assets over liabilities
  
$
1,521
  
 
The excess of assets over liabilities transferred without consideration is treated as a loss on the sale of discontinued operations.
 
NOTE 2
 
To record the release of the balances of cash restricted with respect to George Morgenstern’s Employment Agreement dated January 1,1997, as amended on May 17, 2001; March 13, 2002 and December 30, 2004 and as supplemented by letter agreement dated March 16, 2005.
 
F-4
 
NOTE 3
 
To record the exclusion of Databit’s business activities for the period from January 1, 2005 to December 31, 2005 as follows:
 
Sales
  
$
17,677
  
Cost of sales
    
14,501
 
Gross profit
    
3,176
  
Selling, marketing, general and administrative
    
3,126
  
Operating income
    
50
  
Interest expense
    
5
  
Income before taxes
    
45
  
Taxes on income
    
(1
)
Net income
  
$
46
  
 
F-5