Item
1.01 Entry Into a Material Definitive Agreement
Item
3.02 Unregistered Sales of Equity Securities
On
July
31, 2006 Data Systems & Software Inc. (the “Company”) conducted the second
and final closing of the previously reported private placement of its Common
Stock, par value $.01 per share, resulting in the issuance of 345,685 shares
of
Common Stock. In connection with the closing, the Company entered into
subscription agreements with certain accredited investors for the purchase
of
the shares at a purchase price of $2.65 per share, resulting in gross proceeds
to the Company of $916,061. This
brings the aggregate gross proceeds raised in the offering to $3.18 million
and
the aggregate number of shares issued to 1.2 million.
By
the
terms of the subscription agreements, each subscriber, in addition to the
Common
Stock purchased, received a warrant exercisable for the purchase of 25% of
the
number of shares purchased, resulting in the issuance of warrants to purchase
86,424 shares. The warrants are exercisable for shares of the Company’s Common
Stock for a period of five years at an exercise price of $2.78 per share
and are
redeemable by the Company in certain circumstances. Warrants to issue an
aggregate of 300,005 shares of Common Stock were issued to subscribers in
the
offering.
The
subscription agreements require the Company to file a registration statement
covering the shares of Common Stock purchased and the shares of Common Stock
underlying the warrants by August 30, 2006. If the registration statement
is not
filed by such date, or is not declared effective within 120 days of such
date,
the Company will be required to pay liquidated damages to the subscribers
equal
to 1.25% of the total amount invested on a prorated monthly basis up to an
aggregate 11.25%.
In
connection with the offering, the Company entered into a placement agent
agreement with First Montauk Securities Corp. (“First Montauk”) appointing it
exclusive placement agent. According to the terms of the agreement, the
placement agent is entitled to receive a 7% selling commission, 3% management
fee, and 1% advisory fee of the gross proceeds of the offering. In addition,
the
placement agent is entitled to warrants with the same terms as those issued
to
the subscribers exercisable for the purchase of 10% of the number of shares
purchased in the offering.
Out
of
the gross proceeds received at the final closing, the Company paid the placement
agent fees and commissions of approximately $100,000. In addition, the Company
issued to the placement agent warrants to purchase 34,569 shares of Common
Stock
on the same terms as those issued to the subscribers. The total of placement
agent fees and commissions paid in connection with the offering was
approximately $350,000 and the total number of warrants issued to the placement
agent was 120,001.
The
issuance and sale of the Common Stock and warrants was made to accredited
investors in reliance upon the exemption provided in Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”). As such, the
securities sold in the offering have not been registered under the Securities
Act and may not be offered or sold in the United States absent registration
or
an applicable exemption from the registration requirements. No form of general
solicitation or general advertising was conducted in connection with offering.
Each of the warrants and the certificates representing the shares of Common
Stock issued pursuant to the subsciption agreements will contain restrictive
legends preventing the sale, transfer or other disposition of such shares
and
warrants, unless registered under the Securities Act.
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 4th day of August, 2006.
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DATA
SYSTEMS & SOFTWARE INC. |
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By: |
/s/ Sheldon
Krause |
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Name:
Sheldon Krause |
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Title:
Secretary and General Counsel |