As filed with Securities and Exchange Commission on October 29, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DATA SYSTEMS & SOFTWARE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2786081
(State of (I.R.S. Employer
incorporation) Identification No.)
200 ROUTE 17
MAHWAH, NJ 07430
(201) 529-2026
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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GEORGE MORGENSTERN
DATA SYSTEMS & SOFTWARE INC.
200 ROUTE 17
MAHWAH, NEW JERSEY 07430
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
SHELDON KRAUSE
EHRENREICH EILENBERG KRAUSE & ZIVIAN LLP
11 EAST 44TH STREET
NEW YORK, NEW YORK 10017
(212) 986-9700
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. __
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------- --------------------- -------------------- --------------------- --------------------
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price per aggregate offering registration fee
registered share price
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock, par 250,000(1) $3.31(2) $827,500 $243.25
value $.01 per share
("Common Stock")
- ----------------------- --------------------- -------------------- --------------------- --------------------
Common Stock 100,000(1) $3.06(2) $306,000 $85.07
- ----------------------- --------------------- -------------------- --------------------- --------------------
Common Stock 20,000(1) $3.06(2) $61,200 $17.01
- ----------------------- --------------------- -------------------- --------------------- --------------------
Common Stock 1,304,526(3) $2.3125(4) $3,016,716 $838.65
- ----------------------- --------------------- -------------------- --------------------- --------------------
Total $1,183.98
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
(1) Shares which may be sold by Selling Security Holders following exercise of
certain outstanding warrants.
(2) Pursuant to Rule 457(g), calculated upon the basis of the exercise price of
the warrants.
(3) Shares which may be sold by selling security holders following conversion of
certain convertible subordinated debentures.
(4) Pursuant to Rule 457(c), calculated upon the basis of the average of the
high and low prices of the Common Stock, as quoted through the NASDAQ National
Market, on October 27, 1999.
<PAGE>
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The Registrant hereby amends the Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these Securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
(Subject to completion, dated October 29, 1999)
1,674,526 SHARES
DATA SYSTEMS & SOFTWARE INC.
COMMON STOCK
Certain of our security holders may sell, from time to time, up to
1,674,526 shares of our common stock. See "Selling Security Holders." The
selling security holders may sell shares:
o through the Nasdaq Stock Market, in the over-the-counter market, in
privately negotiated transactions or otherwise;
o directly to purchasers or through agents, brokers, dealers or
underwriters; and
o at market prices prevailing at the time or sale, at prices related to
the prevailing market prices, or at negotiated prices.
Our common stock is listed on the Nasdaq National Market under the symbol
"DSSI." On October 27, 1999 the closing price of the common stock was $2.375 per
share.
Investing in our securities involves certain risks. You should consider the
"Risk Factors" beginning on page 1 in deciding whether to buy any common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus in truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is October 29, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
Risk Factors..................................................................1
Selling Security Holders......................................................8
Use of Proceeds...............................................................9
Plan of Distribution..........................................................9
Legal Matters.................................................................10
Where You Can Find More Information...........................................10
Information Incorporated by Reference.........................................11
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in, or incorporated by reference in, this
prospectus are forward-looking in nature. These statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should" or "anticipates" or the negatives thereof or comparable
terminology, or by discussions of strategy. You are cautioned that our business
and operations are subject to a variety of risks and uncertainties and,
consequently, our actual results may materially differ from those projected by
any forward-looking statements. Certain of such risks and uncertainties are
discussed below under the heading "Risk Factors." We make no commitment to
revise or update any forward-looking statements in order to reflect events or
circumstances after the date any such statement is made.
RISK FACTORS
Investing in this company entails substantial risk. You should consider the
following risks and other information contained in this prospectus, information
incorporated by reference, and information which we file with the Securities and
Exchange Commission from time to time. The information in this prospectus is
complete and accurate as of this date, but the information may change after the
date of this prospectus.
GENERAL
We Have a History of Operating Losses and May Not be Able to Continue Operations
if We do Not Generate Positive Cash Flow.
We are experiencing and have in the past experienced operating losses. We
do not currently expect our operations to generate sufficient revenues to cover
our anticipated operating costs during the remainder of 1999 and therefore
expect to operate at a cash flow deficit during such period. If we are unable to
generate sufficient revenues to fund our activities in the longer term, we may
not be able to continue our operations as currently conducted.
We Will Need Additional Capital to Fund our Operations.
Although we believe that we have sufficient liquidity to fund our
activities in the short-term, we will require additional financing to fund our
operations, particularly the activities of the data communications solutions for
utilities segment. If we are unable to obtain financing on commercially
reasonable terms, we may have to curtail or discontinue certain of our
activities. We may not be able to obtaining the financing necessary to continue
our operations as currently conducted.
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Our Operating Results May Fluctuate Significantly.
Our operating results may fluctuate significantly in the future due to a
variety of factors, some of which are outside of the Company's control,
including the following:
o general economic conditions and economic conditions in the semiconductor
and utility industies, particularly;
o the effects of governmental regulations and regulatory changes;
o capital expenditures and other costs relating to the expansion of our
operations;
o the rate at which we are able to develop and introduce to production new
products and processes;
o the rate at which established utilities, other utility industry
participants and utility customers enter into new contracts;
o seasonality within the utility and other industries;
o market cycles within the semiconductor industry; and
o prices charged by suppliers.
Our Markets are Subject to Rapid Technological Change.
The markets for our products and services are characterized by rapid
technological change. We will need to invest in continued product and/or process
development in order to keep pace with changing technologies. We may not have
adequate resources to invest in development, and our development efforts may not
be successful.
Our Markets are Highly Competitive.
All of our markets are highly competitive. We compete with large and small,
foreign and domestic competitors, some of whom have greater marketing and other
resources, larger capacity, lower costs and/or longer operating histories.
Competition in all of these markets, particularly within the semiconductor
market, has resulted in significant pressure to reduce prices.
We Depend Upon the Intellectual Property of Third Parties.
Certain of our activities make use of intellectual property owned by third
parties. We believe that we are in compliance with the licensing agreements and
that the licensing agreements adequately protect our rights. Failure to maintain
our licenses could have a material adverse effect on our business.
We May be Subject to Intellectual Property Rights Disputes.
Our ability to compete successfully depends in part on our ability to
operate without infringing on the proprietary rights of others. There are no
pending lawsuits against us regarding the infringement of existing patents or
intellectual property rights. However, our Tower Semiconductor Ltd. affiliate
has been approached by two separate parties who alleged that Tower was
infringing on certain semiconductor production patents owned by those parties.
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Tower obtained a license from one party without royalty or other payment and is
negotiating with the other party. The claims of this party and possible future
infringement claims could harm our business and financial condition.
Exchange Rate Fluctuations May Affect the Cost of our Israeli Operations.
A significant portion of our sales and expenses are in New Israeli Shekels
("NIS"). The dollar cost of our operations in Israel will be increased if the
rate of inflation in Israel is not offset (or is offset on a lagging basis) by
the devaluation of the NIS in relation to the dollar.
Our Failure to Comply with Environmental Regulations Could Seriously Harm Our
Company.
Certain of our businesses, particularly the activities of our Tower
Semiconductor Ltd. affiliate, are subject to a variety of laws and governmental
regulations in the U.S. and Israel relating to the use, discharge and disposal
of toxic or otherwise hazardous materials used in our production processes.
While we believe that we are currently in compliance in all material respects
with applicable laws and regulations, if we fail to use, discharge or dispose of
hazardous materials appropriately, our company could be subject to substantial
liability or could be required to suspend or adversely modify our manufacturing
operations. In addition, we could be required to pay for the cleanup of our
properties if they are found to be contaminated even if we are not responsible
for the contamination. We maintain insurance policies to guard against losses
resulting from environmental harm caused by our company. While we believe our
insurance coverage is adequate, we cannot assure you that it would be sufficient
to cover all our potential losses.
We Depend on the Services of a Few Key Employees.
We depend on our key management and technical employees. The loss of
certain managers could diminish our ability to develop and maintain
relationships with customers and potential customers. The loss of technical
personnel could harm our ability meet development and implementation schedules.
We do not maintain a "key man" life insurance policy on any of our executives or
employees. Our future success also depends on our continuing ability to
identify, hire, train and retain other highly qualified technical and managerial
personnel. Competition for such personnel is intense. If we fail to attract or
retain highly qualified technical and managerial personnel in the future, our
business could be disrupted.
Year 2000 Problems May Harm our Business.
Many existing computer systems and applications may not function properly
when using dates beyond December 31, 1999. We are engaged in a program to
address year 2000 issues throughout the company. To date, we believe that we
have identified all systems that are implicated. We are working, in conjunction
with our vendors, where possible, to identify and solve potential year 2000
problems. Specifically, Tower is implementing vendor-supplied upgrades or
replacements of the software that controls the fab system, machinery and
equipment. We do not anticipate that the cost of year 2000 compliance will be
material. We cannot assure
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you that we have identified or will be able to correct all potential year 2000
problems, or that our key suppliers and customers have done so. If we or our key
suppliers or customers fail to cure any year 2000 compliance problems, our
business could be seriously harmed.
RISKS RELATED TO THE DATA COMMUNICATIONS SOLUTIONS FOR UTILITIES SEGMENT
We have made a significant investment into our data communications
solutions for utilities segment, which develops and markets systems offering
two-way automated meter reading and related data management capability to
utilities, other utility industry participants and utility customers. Although
the revenue base of the segment has improved, to date this segment has generated
limited revenue and has operated at a loss. We expect to continue our investment
in the data communications solutions for utilities business. The activities of
this segment are subject to many risks, including the following:
We Depend Upon the Utility Market.
The automation of utility meter reading and data distribution is a
relatively new and rapidly changing market. We believe that, as the utility
industry becomes more competitive through various deregulation and privatization
initiatives, the need for more accurate, timely and efficient collection of
consumption and other operating data will accelerate the adoption of automated
meter reading, data collection and data distribution systems and techniques.
However, this is entirely dependent upon decisions made by utilities, other
utility industry participants and utility customers over whom we have no
control. We cannot accurately predict the size of our market or its potential
growth.
The Regulatory Environment is Uncertain.
The electric utility industry is undergoing significant deregulation, which
we expect to include requirements or incentives for utility companies to
implement programs using automated meter reading and data distribution. However,
the pace of deregulation and privatization has not been as rapid as expected. In
addition, the results of deregulation are uncertain, and privatization may not
result in the mandates or incentives for the types of services for which
automated meter reading is necessary. If the state and federal regulation does
not provide these requirements or incentives, the market for data communications
solutions for utilities may not develop. To date, only a limited number of
utilities have made purchase commitments for automated meter reading and data
distribution systems.
Utility Customers May Not Adopt Our Solutions.
The systems offered by our data communications solutions for utilities
segment are just possible solutions for automated meter reading and data
management. There are many alternative solutions, and we cannot predict what
share of the market we will obtain. Competing systems have been and likely will
continue to be selected by certain utilities and other potential clients. If our
potential customers do not adopt our technology or do so less rapidly than we
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expect, our future financial results, our ability to achieve positive cash flow
or profitability, will be adversely affected.
We May Encounter Difficulties in Implementing our Technology, Products and
Services.
Problems may occur in the implementation of our technology, products or
services, and we may not successfully complete the commercial implementation of
our technology on a wide scale. Future advances may render our technology
obsolete or less cost effective than competitive systems. Consequently, we may
be unable to offer competitive services or offer appropriate new technologies on
a timely basis or on satisfactory terms.
We Rely Upon Third-Party Manufacturers of Certain Components.
We use outside parties to manufacture components of some of our products.
These manufacturers may not be able to meet our manufacturing needs in a
satisfactory and timely manner. Delays or quality control problems at our
third-party manufacturers could harm our relationships with our customers, our
operating results and cash flow. In addition, our reliance on third party
manufacturers exposes us to risks that are out of our control relating to
quality control and pricing. An increase in the price or reduction in the
quality of the components produced by third party manufacturers could harm our
business.
RISKS RELATED TO THE SEMICONDUCTOR SECTOR.
The results of operations of our Tower Semiconductor Ltd. affiliate can
have a significant impact on our consolidated net income or loss and net income
or loss per share. The activities of Tower are subject to certain risks,
including the following:
Tower Must Operate at or Close to Capacity to Earn a Profit.
Because fixed costs represent a substantial portion of the operating costs
of semiconductor manufacturing operations, Tower must operate at or near
capacity to be profitable. Tower has operated below capacity throughout 1999,
although usage has improved recently. If operations do not continue to improve
to near capacity levels, Tower will not be able to achieve profitable
operations.
The Cyclical Nature of the Semiconductor Industry and the Resulting Periodic
Overcapacity May Seriously Harm Our Business.
The semiconductor industry has historically been highly cyclical and, at
various times, has experienced significant economic downturns characterized by
production overcapacity, reduced product demand, and rapid erosion of average
selling prices. Historically, companies in the semiconductor industry have
expanded aggressively during periods of increased demand. As a result of this
expansion, periods of overcapacity have frequently followed periods of increased
demand. We expect this pattern to repeat in the future. Tower's operating
results for 1996, 1997, 1998 and 1999 were harmed by a downturn in the
semiconductor market. Future downturns could be severe and could seriously harm
Tower's operating results.
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Tower Must Advance its Portfolio of Process Technologies.
The semiconductor market is characterized by the following:
o rapid technological development;
o evolving industry standards;
o changes in customer requirements;
o frequent new product introductions and enhancements; and
o short product life cycles with declining prices over the life cycle of the
product.
Therefore, in order to serve its current customers and attract new customers,
Tower must enhance its manufacturing process technologies. Tower is currently
completing the development and/or production of new process technologies,
including the CMOS image sensor, microFLASH(R) and 0.35 micron processes.
Tower's ability to achieve and maintain profitable operations depends on the
successful development and introduction to production of these processes. The
development and introduction to production of new products is be subject to the
following risks, which could seriously harm Tower's business:
o problems or delays in the development of new processes;
o competition in attracting and retaining customers for the new processes;
and
o failure of products designed to use specialized processes to gain market
acceptance.
Tower Depends on Technology Partners.
In order to compete in its market, Tower must continue to advance its
process technologies through its internal technology development efforts and
technology alliances with leading semiconductor suppliers. Although Tower has an
internal process development team dedicated to developing new semiconductor
manufacturing process technologies, it is dependent on having technology
partners to advance its portfolio of process technologies. If Tower is unable to
continue its technology alliances, or is unable to enter into new technology
alliances with other leading semiconductor suppliers, Tower may not be able to
continue providing its customers with leading edge process technologies, which
could seriously harm our company.
Tower's Facility Has Certain Limitations, and Tower May Not be Able to Obtain
Financing for Additional Facilities.
The trend within the semiconductor industry is toward reducing process
geometries to 0.35, 0.25 and 0.18 microns, and even lower geometries. Because of
certain facility and other constraints, Tower is unable to reduce its process
geometries below 0.35 in its current facility. In order to successfully compete
over the long term, Tower will probably need to expand its facilities by
building or acquiring a new wafer fabrication facility. The cost of constructing
a new facility would likely exceed $1 billion. Tower may not be able to obtain
financing or government grants to initiate and implement this project.
Tower Depends on a Small Number of Customers for a Significant Portion of Its
Revenues.
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Tower is largely dependent on two of its customers for the majority of its
business. Although it is expanding its customer base, we expect that Tower will
continue to receive a significant portion of its revenue from a limited number
of customers. Loss or cancellation of business from or decreases in the prices
of services sold to, any of these customers could seriously harm Tower. Tower's
arrangements with certain customers permit these customers to reduce their
orders. If its customers order significantly fewer wafers than forecast, Tower
might have to reduce prices in order to sell its excess capacity. In addition,
Tower might have difficulty adjusting its costs to compensate for revenue
shortfalls due to lower than anticipated orders.
We May Not Continue to Receive the Grants and Tax Benefits From the Israeli
Government that We Have Received in the Past.
Tower has received certain grants and tax benefits from the government of
Israel under its "Approved Enterprise" program. To continue to be eligible for
these grants and tax benefits, Tower must meet certain conditions, including
making certain specified investments in fixed assets by the end of 2000. To
date, Tower has invested $127.3 million under its current $240 million program.
We cannot assure you that Tower will complete the required investments by the
end of 2000. If Tower loses the grants and benefits or is required to refund
grants already received, the cost of implementing its capital plans will be
higher. We cannot assure you that Tower will receive Approved Enterprise grants
for any new capital expenditures.
We May Experience Difficulty in Achieving Acceptable Device Yields, Product
Performance and Delivery Times as a Result of Manufacturing Problems.
The process technology for the manufacture of semiconductor wafers is
highly complex, requires advanced and costly equipment and is continuously being
modified in an effort to improve device yields and product performance.
Microscopic impurities such as dust and other contaminants, difficulties in the
production process or defects in the key materials and tools used to manufacture
a particular wafer can cause a percentage of the wafers to be rejected or
individual semiconductors on specific wafers to be non-functional. Tower has,
from time to time, experienced production difficulties that have caused delivery
delays and lower than expected device yields. Tower may also experience
difficulty achieving acceptable device yields, product performance and product
delivery times in the future as a result of manufacturing problems. These
problems may result from, among other things, introduction of new processes or
the expansion or upgrading of expanding existing facilities. Any of these
problems could seriously harm Tower's business.
Development and Introduction to Production of Tower's Flash Memory Process Has
Been Slower Than Anticipated.
Tower has made a substantial investment of money and time in the
development of microFLASH processes and products using this process. High
density flash memory is a complex technology that requires strict manufacturing
controls and effective test screens. Tower's microFLASH process is a
breakthrough technology, the development and introduction
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to production of which has been delayed due to the complex nature of the
engineering process. Tower expects to begin production of the first products
utilizing the microFlash process late this year or early in 2000. Tower is not
certain when products using this technology will be introduced into the market.
Demand for New Processes and Products is Difficult to Predict.
The success of Tower's businesses depends on emerging markets and new
products. In order for demand for its processes to grow, the markets for the end
products using these processes must develop and grow. For example, the success
of Tower's image sensor processes will depend, in part, on the markets for
digital photography and video and computer teleconferencing. Because Tower's
processes may be used in many new applications, it is difficult to forecast
demand. Therefore, if demand is lower than expected, Tower may have excess
capacity and if demand is higher than expected, it may be unable to fill all of
the orders it receive.
Tower Depends on its Suppliers of Raw Materials and Equipment and Does Not
Typically Have Long-Term Supply Contracts With Them.
Tower depends on its suppliers of raw materials. To maintain competitive
manufacturing operations, Tower must obtain from its suppliers, in a timely
manner, sufficient quantities of quality materials at acceptable prices. Tower
obtains most of its materials, including critical materials such as raw silicon
wafers, from a limited number of suppliers.
We cannot assure you that Tower will be able to obtain sufficient
quantities of raw materials and other supplies of an acceptable quality or in a
timely manner. If its ability to obtain sufficient quantities of raw materials
and other supplies in a timely manner is substantially diminished or if there
are significant increases in the costs of raw materials, it could seriously harm
our company.
Tower also depends on a limited number of manufacturers and vendors that
make and sell the complex equipment it uses in its manufacturing processes. In
periods of high market demand, the lead times from order to delivery of this
equipment could be as long as 12 to 18 months. If there are delays in the
delivery of this equipment or if there are increases in the cost of this
equipment, it could seriously harm Tower's business.
SELLING SECURITY HOLDERS
Certain of our security holders may sell, from time to time, up to
1,674,526 shares of our common stock pursuant to this prospectus. The table
below identifies the selling security holders and indicates the number of shares
that each selling security holder may sell pursuant to this prospectus. If a
selling security holder transfers any of the shares shown in the table, the
transferee will be considered a selling security holder for purposes of this
prospectus, provided that (1) the transfer was a private placement and (2) the
transferee is identified in a supplement to this prospectus.
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Number of Shares Number of Shares
Name of Selling Security Holder Prior to Sale After Sale
- ------------------------------- ------------- ----------
Bank Leumi USA(1) 83,333(2) 0(3)
Bank Leumi le-Israel, BM(1) 167,667(2) 0(3)
Bounty Investors LLC(4) 890,514(5) 0(3)
Maram Stern(6) 20,000(2) 0(3)
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(1) Holder of shares issuable pursuant to warrants to purchase shares of common
stock for an exercise price of $3.31. The warrants will terminate if not
exercised on or before August 30, 2002.
(2) Assumes exercise of all warrants held by the named selling security holder.
(3) Assumes sale of all shares held by the selling security holder and
registered in this prospectus.
(4) Holder of shares of common stock issuable upon (a) conversion of the $2
million principal amount of 0% Convertible Subordinated Debentures
convertible into shares of common stock and (b) warrants to purchase
100,000 shares of common stock for an exercise price of $3.06625. The
warrants will terminate if not exercised on or before October 12, 2002.
(5) Assumes conversion of all debentures and exercise of all warrants.
(6) Holder of shares issuable upon exercise of warrants to purchase 20,000
shares of common stock for an exercise price of $3.06625. The warrants were
issued as part of a finder's fee in connection with the issuance of the
convertible debentures and will terminate if not exercised on or before
October 12, 2002.
USE OF PROCEEDS
The shares covered by this prospectus are being offered by selling
shareholders and not by our company. Therefore, we will not receive proceeds
from the sale of shares. However, we will receive proceeds from the exercise of
warrants. If all the warrants are exercised, we will receive $1,195,450. We
expect to use any proceeds received upon the exercise of these warrants for
working capital and general corporate purposes.
PLAN OF DISTRIBUTION
The selling security holders may sell shares:
o through the Nasdaq Stock Market, otherwise in the over-the-counter
market, in privately negotiated transactions or otherwise;
o directly to purchases or through agents, brokers, dealers or
underwriters; and
o at market prices prevailing at the time or sale, at prices related to
the prevailing market prices, or at negotiated prices.
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If a selling security holder sells shares through agents, brokers, dealers
or underwriters, such agents, brokers, dealers or underwriters may receive
compensation in the form of discounts, commissions or concessions. This
compensation may be greater than customary compensation.
To the extent required, we will use our best efforts to file one or more
supplements to this prospectus to describe any material information with respect
to the plan of distribution not previously disclosed in this prospectus or any
material change in such information.
LEGAL MATTERS
Certain legal matters relating to the shares of common stock that may be
offered pursuant to this prospectus have been passed upon for us by Ehrenreich
Eilenberg Krause & Zivian LLP, counsel to the our company. Sheldon Krause, a
partner of Ehrenreich Eilenberg Krause & Zivian LLP, is a director of DSSI and
the son-in-law of George Morgenstern, the Chairman of our Board of Directors,
President and Chief Executive Officer.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Accordingly, we file annual,
quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). You may read and copy any
document that we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. You can obtain copies of
our SEC filings at prescribed rates from the SEC Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549. Our SEC filings are also available
to you free of charge at the SEC's web site at http:www.sec.gov.
Shares of our common stock are traded on the Nasdaq National Market.
Documents we file can be inspected at the offices of the National Association of
Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington, D.C.
20006.
You can read and print press releases, financial statements and additional
information about us, free of charge, at our web site at http:www.dssiinc.com.
This Prospectus is a part of a Registration Statement on Form S-3 (together
with all amendments and exhibits, referred to as the "Registration Statement")
filed by us with the SEC under the Securities Act of 1993, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in
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accordance with the rules and regulations of the SEC. For further information
with respect to us and the shares of Common Stock offered hereby, please refer
to the Registration Statement. The Registration Statement may be inspected at
the public reference facilities maintained by the SEC at the addresses set forth
above. Statements in this Prospectus about any document filed as an exhibit are
not necessarily complete and, in each instance, you should refer to the copy of
such document filed with the SEC. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and information that we file later
with the SEC will automatically update and supersede previously filed
information, including information contained in this Prospectus.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until this offering has been completed:
(1) Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
(2) Our Quarterly Report on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999;
(3) Our Proxy Statement for the Annual Meeting of Stockholders held on
June 14, 1999, filed with the SEC on May 25, 1999;
(4) Our Current Reports on Form 8-K filed on June 16, 1999, September 9,
1999 and October 13, 1999; and
(5) The description of our common stock contained in our Registration
Statement on Form 8-A, declared effective by the SEC on February 11,
1992, which was filed pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of updating such
description.
You may request a free copy of these documents by writing to Investor
Relations, Data Systems & Software Inc. 200 Route 17, Mahwah, New Jersey 07430,
or by calling Investor Relations at (201) 529-2026.
You should rely only on the information incorporated by reference or
provided in this Prospectus or a prospectus supplement or amendment. We have not
authorized anyone to provide you with different information. This Prospectus
does not offer these securities in any state where the offer is not permitted.
Also, this Prospectus does not offer to sell any securities other than the
securities covered by this Prospectus. You should not assume that the
information in this Prospectus or a prospectus supplement or amendment is
accurate as of any date other than the date on the front of the document.
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company will pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. Such expenses are set
forth in the following table. All of the amounts shown are estimates except the
SEC registration fee and the Nasdaq National Market listing fee.
SEC registration fee. $1,183.98
NASDAQ National Market listing fee $2,000
Legal fees and expenses ____
Accounting fees and expenses ____
Miscellaneous expenses ____
Total $___
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Certificate of Incorporation and the Amended
Bylaws of the Registrant provide that the Registrant shall indemnify its
officers, directors and certain others to the fullest extent permitted by the
General Corporation Law of Delaware ("DGCL"). Section 145 of the DGCL provides
that the Registrant, as a Delaware corporation, is empowered, subject to certain
procedures and limitations, to indemnify any person against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding (including a derivative action) in which
such person is mad a party by reason of his being or having been a director,
officer, employee or agent of the Registrant (each, an "Indemnitee"); provided
that the right of an Indemnitee to receive indemnification is subject to the
following limitations: (i) an Indemnitee is not entitled to indemnification
unless he acted in good faith and in a manner that he reasonable believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful and (ii) in the case of a derivative action, and Indemnitee is not
entitled to indemnification in the event that he is judged to be liable to the
Company (unless and only to the extent that the court determines that the
Indemnitee is fairly and reasonably entitled to indemnification for such
expenses as the court deems proper). The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
II-1
<PAGE>
Pursuant to Section 145 of the DGCL, the Registrant has purchased insurance
on behalf of its present and former directors and officers against any liability
asserted against or incurred by them in such capacity or arising out of their
status as such.
In accordance with Section 102(b)(7) of the DGCL, the Certificate of
Incorporation of the Registrant eliminates personal liability of the
Registrant's directors to the Registrant or its stockholders for monetary
damages for breach of their fiduciary duties as a director, with certain limited
exceptions set forth in Section 102(b) (7) of the DGCL.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS.
Please see Index of Exhibits on Page II-5 below.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) Securities Act of
1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; PROVIDED,
HOWEVER, that paragraphs A(1)(i) and A(1)(ii) do not apply if the Registration
Statement is on Form S-3 or Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") that are
incorporated by reference in the Registration Statement;
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of this
offering.
B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT
EXCHANGE ACT DOCUMENTS BY REFERENCE.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Carlos, California, on this 29th day of October,
1999.
DATA SYSTEMS & SOFTWARE INC.
By: /s/ George Morgenstern
-------------------------------------
George Morgenstern
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
Morgenstern, as attorney-in-fact, each with the power of substitution, for him
or her in any and all capacities, to sign any amendment to this Registration
Statement and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting to
said attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and onfirming all that said
attorneys-in-fact or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on the
29th day of October, 1999 in the capacities and on the dates indicated.
SIGNATURE TITLE
- --------- -----
/s/ George Morgenster Chairman, President, CEO and Director
- ------------------------------
George Morgenstern
/s/ Yacov Kaufman Vice President, Chief Financial Officer
- ------------------------------ (Principal Financial Officer, Principal
Yacov Kaufman Accounting Officer)
/s/ Robert Kuhn Director
- ------------------------------
Robert Kuhn
/s/ Allen L. Schiff Director
- ------------------------------
Allen I. Schiff
/s/ Harvey Eisenberger Director
- ------------------------------
Harvey Eisenberger
/s/ Maxwell Rabb
- ------------------------------ Director
Maxwell Rabb
/s/ Sheldon Krause Director, Secretary
- ------------------------------
Sheldon Krause
Director
- ------------------------------
Susan L. Malley
II-4
<PAGE>
INDEX OF EXHIBITS
Exhibit
Number Description
- --------------------------------------------------------------------------------
2.1* Warrant Agreement between the Registrant and Bank Leumi USA dated as
of August 30, 1999.
2.2 Securities Purchase Agreement between the Registrant and Bounty
Investors LLC, dated as of October 12, 1999, relating to the purchase and sale
of the Registrant's 0% Convertible Subordinated Debentures and Warrants,
including forms of Debentures, Warrants and Registration Rights Agreement
annexed as exhibits thereto (incorporated herein by reference to the
Registrant's Report on Form 8-K dated October 13, 1999)..
5.1* Opinion of Ehrenreich Eilenberg Krause & Zivian LLP.
23.1* Consent of Independent Auditors.
23.2 Consent of Ehrenreich Eilenberg Krause & Zivian LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included on page II-4).
* To be filed by amendment.
II-5
