Data Systems & Software Inc fka DSSI

[midastouch017]

Data Systems & Software Inc. Announces Results for the Third Quarter and Nine Months Ended September 30, 2005
Tuesday November 15, 5:38 pm ET

MAHWAH, N.J., Nov. 15 /PRNewswire-FirstCall/ -- Data Systems & Software Inc. (OTC Bulletin Board: DSSI - News) today announced results for the quarter and nine months ended September 30, 2005.

The results as reported reflect the sale in August 2005 by the Company and the other shareholders in dsIT Technologies Ltd. of dsIT's outsourcing consulting business to Taldor Computer Systems (1986) Ltd. The operations that were sold were comprised of dsIT's business of providing computer software and systems professionals on a time and materials basis to clients in Israel. Under applicable accounting principles, this business was reclassified in the current periods and for all prior periods as discontinued operations. The condensed result of these operations is presented in each of the current and comparative periods as net income from discontinued operations. The continuing operations of the Company's software consulting and development segment consist of dsIT's project development services and solutions activities.

Sales in the first nine months of 2005 increased by $0.7 million, from $15.9 million in the first nine months of 2004, to $16.6 million in 2005. This increase was due to increased sales in both segments, particularly in the first quarter of this year. Sales in the third quarter of 2005 decreased by $0.2 million, in comparison to those in the third quarter of 2004. The decrease in sales was due to a $0.3 million decrease in computer hardware sales, partially offset by a $0.1 million increase in software development sales.

Gross profit in the first nine months of 2005 increased by $0.1 million, compared to the first nine months of 2004, due to increased gross profit in both segments, resulting primarily from the increase in sales in the first quarter of this year. Gross profit in the third quarter of 2005 remained virtually unchanged compared to the third quarter of 2004, despite the decrease in sales during the 2005 period, as a result of improved gross profit margins in the software development segment.

Selling, marketing, general and administrative expenses in the first nine months of 2005 decreased marginally compared to the first nine months of 2004, due the decrease in the third quarter of 2005. Expenses also decreased $0.3 million, from $2.1 million in the third quarter of 2004, to $1.8 million in the third quarter of 2005. The decrease was primarily due to a decrease in corporate professional fees as well as compensation expense in the computer hardware segment, both of which were unusually high in the third quarter of 2004.

The income tax expense in the third quarter of 2005 and in the first nine months of 2005 was primarily due to a one-time expense due to the reorganization of business at dsIT which resulted in the expensing of previously recognized foreign income tax assets.

The Company's share of Comverge's net loss in the first nine months of 2005 was $0.4 million. 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. The Company will record 7% of any Comverge profits as equity income once the Company's equity in its Comverge investment has reached the level at which the Company ceased recording equity losses.

The Company recorded a gain in the third quarter of 2005 from the sale of dsIT's outsourcing consulting business of $0.915 million, net of tax. The decrease in net income from these discontinued operations in the third quarter and first nine months of 2005 was entirely attributable to the fact that the third quarter of 2005 included activity only up to the date of the sale, which occurred in the middle of the quarter.

George Morgenstern, Chairman, President and Chief Executive Officer of DSSI commented: "With the sale of our Israeli consulting business, we have a renewed focus on our solutions business and our hardware sales activities. The additional working capital which we generated from the sale gives us a more stable platform from which we hope to increase sales and profitability of these operations in the coming year."

Data Systems & Software Inc. (OTC Bulletin Board: DSSI - News) 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 http://www.dssiinc.com.

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