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    <div>&#160;</div>
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    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNITED
      STATES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      AND EXCHANGE COMMISSION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Washington,
      D.C. 20549</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PURSUANT
      TO SECTION 13 OR 15(d) OF THE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      EXCHANGE ACT OF 1934</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Date
      of Report (Date of earliest event reported)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>
      July 31, 2006 </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman"><strong>DATA
      SYSTEMS &amp; SOFTWARE INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(Exact
      name of Registrant as Specified in its Charter)</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="middle" width="31%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Delaware</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0-19771
                </font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22-2786081
                </font></div>
            </td>
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          <tr>
            <td valign="middle" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                or Other Jurisdiction of Incorporation) </font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;(Commission
                file Number)</font></div>
            </td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                Employer Identification No.) </font></div>
            </td>
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            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
          </tr>
          <tr>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
          </tr>
          <tr>
            <td valign="middle" width="31%" style="border-bottom: black thin solid;">&#160;<font size="2">200
              Route 17, Mahwah, New Jersey<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></font></td>
            <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td valign="middle" width="31%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td valign="middle" width="31%" style="border-bottom: black thin solid;"><font size="2">07430&#160;</font>&#160;</td>
          </tr>
          <tr>
            <td valign="middle" width="31%">&#160;<font size="2">(Address of
              Principal Executive Offices)&#160;</font></td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%"><font size="2">&#160;(Zip
              Code)</font>&#160;</td>
          </tr>
          <tr>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
          </tr>
          <tr>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
            <td width="2%">&#160;</td>
            <td valign="middle" width="31%">&#160;</td>
          </tr>
          <tr>
            <td colspan="5" valign="middle" width="97%">&#160;&#160;<font size="2">Registrant&#8217;s telephone
              number, including area code <font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(201)
              529-2026</u></font></font>&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
      Written communications
      pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
      Soliciting material
      pursuant to Rule 14a-2 under the Exchange Act (17 CFR 240.14a-2)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
      Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-2(b))</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>
      Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font size="2"><br></font>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        1.01 Entry Into a Material Definitive Agreement</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        3.02 Unregistered Sales of Equity Securities</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        July
        31, 2006 Data Systems &amp; Software Inc. (the &#8220;Company&#8221;) 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. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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&#8217;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.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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%.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        connection with the offering, the Company entered into a placement agent
        agreement with First Montauk Securities Corp. (&#8220;First Montauk&#8221;) 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. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 &#8220;Securities Act&#8221;). 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. </font></div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">2</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SIGNATURES</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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              <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
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              <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DATA
                SYSTEMS &amp; SOFTWARE INC.</font></td>
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              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
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              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:&#160;&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/&#160;Sheldon
                Krause</font></td>
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                <hr style="COLOR: black" align="left" noshade size="2" width="80%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
                Sheldon Krause</font></td>
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              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title:
                Secretary and General Counsel</font></td>
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{"company-data": {"conformed-name": "DATA SYSTEMS & SOFTWARE INC", "cik": "0000880984", "assigned-sic": "7371", "irs-number": "222786081", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-19771", "film-number": "061006796"}, "business-address": {"street1": "200 RTE 17", "city": "MAHWAH", "state": "NJ", "zip": "07430", "phone": "2015292026"}, "mail-address": {"street1": "200 ROUTE 17", "city": "MAHWAH", "state": "NJ", "zip": "07430"}, "former-company": {"former-conformed-name": "DEFENSE SOFTWARE & SYSTEMS INC", "date-changed": "19930328"}}
Unassociated Document
UNITED
      STATES
SECURITIES
      AND EXCHANGE COMMISSION
Washington,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT
PURSUANT
      TO SECTION 13 OR 15(d) OF THE
SECURITIES
      EXCHANGE ACT OF 1934
Date
      of Report (Date of earliest event reported)
July 31, 2006
DATA
      SYSTEMS & SOFTWARE INC.
(Exact
      name of Registrant as Specified in its Charter)
Delaware
0-19771
22-2786081
(State
                or Other Jurisdiction of Incorporation)
(Commission
                file Number)
(IRS
                Employer Identification No.)
200
              Route 17, Mahwah, New Jersey
07430
(Address of
              Principal Executive Offices)
(Zip
              Code)
Registrant's telephone
              number, including area code
(201)
              529-2026
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions:
o
Written communications
      pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material
      pursuant to Rule 14a-2 under the Exchange Act (17 CFR 240.14a-2)
o
Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-2(b))
o
Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))
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.
2
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.
DATA
                SYSTEMS & SOFTWARE INC.
By:
/s/ Sheldon
                Krause
Name:
                Sheldon Krause
Title:
                Secretary and General Counsel
3