Item
1.01 Entry Into a Material Definitive Agreement
Item
3.02 Unregistered Sales of Equity Securities
On
July
13, 2006 Data Systems & Software Inc. (the “Company”) conducted an initial
closing of a private placement of its Common Stock, par value $.01 per share,
resulting in the issuance of 854,318 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 $2.26 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
213,581 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.
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 within 30 days of the final closing of the offering.
If
the registration statement is not filed within such 30-day period or is not
declared effective within 120 days of the date of its filing, 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 retained a registered broker-dealer
to
serve as 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 initial closing, the Company paid the
placement agent commissions and expenses of approximately $265,000. In addition,
the Company issued to the placement agent warrants to purchase 85,432 shares
of
Common Stock on the same terms as those issued to the subscribers.
Under
the
terms of the offfering, the Company may raise gross proceeds of up to an
aggregate of $3,180,000 (including the amount received at the initial closing),
at a price of $2.65 per share. The offering commenced on June 12, 2006 and
will
terminate on August 11, 2006. Any additional securities will be issued at
one or
more additional closings.
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.
In
connection with the initial closing, the Company issued the press release
annexed as Exhibit 99.1 hereto.
Item
9.01 Financial Statements and Exhibits.
| |
99.1
|
Press
Release dated July 13, 2006
|
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 20th day of July 2006.
DATA
SYSTEMS & SOFTWARE INC.
By: /s/
Sheldon Krause_________
Name:
Sheldon Krause
Title:
Secretary and General Counsel