FOR IMMEDIATE RELEASE
CONTACT:
George Morgenstern, CEO
DATA SYSTEMS & SOFTWARE INC.
(201) 529-2026 E-mail: ir@dssiinc.com
DATA SYSTEMS & SOFTWARE INC. ANNOUNCES
RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2004
Mahwah, New Jersey -November 12, 2004 -- Data Systems & Software Inc. (NASDAQ:
DSSI) today announced results for the quarter and nine months ended September
30, 2004.
The decrease in sales in the first nine months of 2004, as compared to
the same period in 2003, was due the inclusion of Comverge's sales of $4.7
million in the first quarter of 2003; commencing the second quarter of 2003 the
Company no longer consolidated Comverge's operations. The increase in sales in
the third quarter of 2004 was due to a $1 million increase in computer hardware
sales, which was partially offset by a $0.1 million decrease in software
consulting and development sales. The increase in computer hardware sales was
primarily from increased sales to Databit's existing customers. The decrease in
software consulting and development sales was due a decrease in development
project revenues.
The decrease in gross profits in the first nine months of 2004 as
compared to the same period in 2003, was attributable to the inclusion of
Comverge's gross profit of $1.3 million in the first quarter of 2003. This
decrease was net of an increase in gross profit in both of the Company's
consolidated segments. In the third quarter of 2004, gross profit and gross
profit margins increased in both operating segments compared to the third
quarter of 2003.
The decrease in SMG&A in the first nine months of 2004, as compared to
SMG&A in the first nine months of 2003, is attributable to the fact that the
2003 period included $2.2 million of Comverge's SMG&A and since the second
quarter of 2003, we no longer consolidate Comverge's operations. The remaining
decrease in SMG&A was also due to decreased corporate G&A and a decrease in
SMG&A in our software consulting and development segment. The increase in SMG&A
in the third quarter of 2004 as compared to third quarter of 2003 was primarily
due to costs associated with the Company's contemplated transaction with Kardan,
which was discontinued by Kardan in the third quarter of 2004. The equity loss
in the third quarter and first nine months of 2004 was attributable to DSSI's
Comverge investment, which the Company accounts for on an equity basis
commencing the second quarter of 2003. DSSI's share of Comverge's net loss of
$2.7 million and $6.9 million in the third quarter and first nine months of 2004
was $0.4 million and $1.1 million, respectively. Comverge's increased loss in
both of the 2004 periods was primarily due to increased SMG&A expenses, which
was primarily attributable to the marketing expenses associated with its new VPC
programs and the deferral into the fourth quarter and future periods of certain
revenues pending the completion of certain tests related to these programs.
In addition, during the third quarter of 2004, DSSI sold a portion of
its investment in Comverge, resulting in income of approximately $0.7 million.
As of September 30, 2004 DSSI's shareholders' equity was $2.3 million,
$0.2 million short of the $2.5 million minimum required for continued listing on
the Nasdaq SmallCap Market. As a result, DSSI's securities may be delisted from
The Nasdaq Stock Market. The Company intends to present to Nasdaq its plan for
regaining and maintaining compliance with the minimum shareholders equity
requirement.
George Morgenstern, Chairman and Chief Executive Officer of DSSI
commented: "We congratulate Comverge on its successful raising of $13.6 million
in its most recent equity financing round. This is an additional vote of
confidence by both its current and new shareholders in Comverge's business model
and future. However, due to expenses associated with its VPC contracts and
deferral of certain revenues into Q4 and future periods, our equity losses in
Comverge continue to be the primary source of our net loss." Mr. Morgenstern
added: "We are continuing to explore various alternatives to increase our
shareholders equity and enhance value to our shareholders over the long term."
DSSI 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. affiliate provides energy intelligence solutions to
utilities. For more information, contact: George Morgenstern, CEO, (201)
529-2026, ir@dssiinc.com.
This press release includes forward-looking statements, which are subject to
risks and uncertainties, including risks associated with (i) successful
implementation of the Company's plan for financing its operations over the next
12 months, (ii) conditions in the computer hardware and IT solutions markets,
and (iii) the Company's business generally. The Company may require additional
liquidity to finance its US-based operating and corporate activities over the
next 12 months. The Company is considering alternatives to increase
shareholders' equity, provide additional liquidity for its operations and
enhance shareholder value, including possible restructuring, merger or
acquisition and/or financing transactions. There is no assurance that the
Company will be able to complete such a transaction on a timely basis. There is
no assurance that the Company will be able to regain and maintain the minimum
shareholders equity required for continued listing on The Nasdaq Stock Market.
Actual results may vary from those projected or implied by forward-looking
statements in this release. A more complete discussion of risks and
uncertainties which may affect the accuracy of these statements and the
Company's business generally is included in "Business--Factors Which May Affect
Future Results" in the Company's most recent Annual Report on Form 10-K as filed
by the Company with the Securities and Exchange Commission.
Tables Follow
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
As of
ASSETS As of December 31 September 30
------------- -------------
Current assets: (unaudited)
Cash and cash equivalents .............................................. $ 1,213 $ 896
Restricted cash ........................................................ 241 241
Accounts receivable, net ............................................... 7,053 6,361
Inventory .............................................................. 88 87
Other current assets ................................................... 661 768
------------- -------------
Total current assets ............................................... 9,256 8,353
------------- -------------
Investment in Comverge, net ................................................. 68
Property and equipment, net ................................................. 814 677
Other assets ................................................................ 613 540
Funds in respect of employee termination benefits ........................... 2,379 2,636
Goodwill .................................................................... 4,430 4,236
Other intangible assets, net ................................................ 114 85
------------- -------------
Total assets ....................................................... $ 17,674 $ 16,527
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank credit and current maturities of long-term debt ........ $ 1,517 $ 1,394
Trade accounts payable ................................................. 2,586 2,315
Accrued payroll, payroll taxes and social benefits ..................... 1,451 1,431
Other current liabilities .............................................. 2,973 2,064
------------- -------------
Total current liabilities .......................................... 8,527 7,204
------------- -------------
1,268
Investment in Comverge, net ................................................. --
------------- -------------
Long-term liabilities:
Long-term debt ......................................................... 632 241
Other liabilities ...................................................... 227 84
Liability for employee termination benefits ............................ 3,721 4,088
------------- -------------
Total long-term liabilities ..................................... 4,580 4,413
------------- -------------
Minority interests .......................................................... 1,367 1,351
------------- -------------
Shareholders' equity:
Common stock - $0.01 par value per share:
Authorized - 20,000,000 shares;
Issued - 8,740,729 and 8,842,395 shares as of
December 31, 2003 and September 30, 2004, respectively .......... 87 88
Additional paid-in capital ............................................. 39,595 39,685
Warrants ............................................................... 461 461
Stock-based deferred compensation ...................................... -- (64)
Accumulated deficit .................................................... (33,069) (33,929)
Treasury stock, at cost - 838,704 and 820,704 shares at December 31, 2003 and
June 30, 2004, respectively ........................................ (3,874) (3,791)
Accumulated other comprehensive loss ................................... -- (159)
------------- -------------
Total shareholders' equity ......................................... 3,200 2,291
------------- -------------
Total liabilities and shareholders' equity ......................... $ 17,674 $ 16,527
============= =============
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
Consolidated Statements Of Operations
(in thousands, except per share data)
Nine months ended Three months ended
September 30, September 30,
-------------------- --------------------
2003 2004 2003 2004
-------- -------- -------- --------
Sales:
Products ....................................................... $ 16,900 $ 13,157 $ 3,779 $ 4,764
Services ....................................................... 7,306 6,831 2,327 2,141
Projects ....................................................... 2,459 2,049 564 577
-------- -------- -------- --------
Total sales .............................................. 26,665 22,037 6,670 7,482
-------- -------- -------- --------
Cost of sales:
Products ....................................................... 13,951 10,801 3,202 3,887
Services ....................................................... 5,082 5,049 1,665 1,670
Projects ....................................................... 2,087 1,655 601 469
-------- -------- -------- --------
Total cost of sales ...................................... 21,120 17,505 5,468 6,026
-------- -------- -------- --------
Gross profit ................................................... 5,545 4,532 1,202 1,456
Research and development expenses ................................ 153 -- -- --
Selling, marketing, general and administrative expenses .......... 8,345 5,496 1,982 2,168
-------- -------- -------- --------
(2,953) (964) (780) (712)
Operating loss
Interest income ..................................................... 42 79 15 2
Interest expense .................................................... (714) (125) (68) (39)
Other income (expense), net ......................................... (408) 239 (243) 2
-------- -------- -------- --------
Loss before taxes on income .................................... (4,033) (771) (1,076) (747)
Taxes on income ..................................................... 7 17 (27) 37
-------- -------- -------- --------
Loss from operations of the Company and its consolidated subsidiaries (4,040) (788) (1,049) (784)
Share of losses in Comverge ......................................... (1,161) (1,066) (611) (382)
Gain on sale of shares in Comverge .................................. -- 705 -- 705
Minority interests .................................................. 139 (59) 35 (11)
-------- -------- -------- --------
Net loss from continuing operations .......................... (5,062) (1,208) (1,625) (472)
Net income (loss) from discontinued operations, net of tax .......... (38) 348 (4) --
-------- -------- -------- --------
Net loss ..................................................... (5,100) (860) (1,629) (472)
-------- -------- -------- --------
Differences from translation of financial statements of subsidiaries -- (159) -- 11
-------- -------- -------- --------
Comprehensive loss ........................................... $ (5,100) $ (1,019) $ (1,629) $ (461)
======== ======== ======== ========
Basic and diluted net income (loss) per share:
Loss per share from continuing operations ......................... $ (0.66) $ (0.15) $ (0.21) $ (0.06)
Discontinued operations ........................................... -- -- 0.00 --
-------- -------- -------- --------
Basic and diluted net income (loss) per share ..................... $ (0.66) $ (0.11) $ (0.21) $ (0.06)
======== ======== ======== ========
Weighted average number of shares outstanding:
Basic and diluted ........................................... 7,680 7,927 7,894 7,936
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