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) March 10, 2006


                          DATA SYSTEMS & SOFTWARE INC.
           (Exact name of Registrants as Specified in their Charters)


           Delaware                    0-19771                  22-2786081
-----------------------------   -------------------------   --------------------
(States or Other Jurisdiction   (Commission file Numbers)     (IRS Employer
     of Incorporation)                                      Identification Nos.)

                   200 Route 17, Mahwah, New Jersey      07430
             ----------------------------------------  ----------
             (Address of Principal Executive Offices)  (Zip Code)

        Registrants' 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:

|_|   Written  communications  pursuant to Rule 425 under the Securities Act (17
      CFR 230.425)

|_|   Soliciting  material pursuant to Rule 14a-2 under the Exchange Act (17 CFR
      240.14a-2)

|_|   Pre-commencement  communications  pursuant  to  Rule  14d-2(b)  under  the
      Exchange Act (17 CFR 240.14d-2(b))

|_|   Pre-commencement  communications  pursuant  to  Rule  13e-4(c)  under  the
      Exchange Act (17 CFR 240.13e-4(c))

<PAGE>

Item 1.01. Entry into Material Definitive Agreement.

Item 1.02. Termination of a Material Definitive Agreement

Item 2.01. Completion of Acquisition or Disposition of Assets

Item 5.02. Departure of Directors or Principal Officers;  Election of Directors;
Appointment of Principal Officers.

      1. Sale of Databit Subsidiary; Related Transactions. On March 10, 2006 the
Registrant  entered into a Stock  Purchase  Agreement  dated as of March 9, 2006
(the "Stock Purchase  Agreement"),  for the sale of all the outstanding  capital
stock  of its  Databit  Inc.  subsidiary  ("Databit")  to  Shlomie  Morgenstern,
President of Databit and a Vice President of the  Registrant.  The  transactions
contempalted under the SPA, and the related transactions to which the Regstrant,
Shlomie Morgenstern and George Morgenstern were party and which are described in
this Report  (collectively,  the  "Transactions"), were consummated on March 10,
2006.

      The closing of the Transactions was  conditioned,  among other things,  on
the following:

            (a) Termination of the Employment  Agreement  dated  August 19, 2004
among Shlomie  Morgenstern,  Databit and the  Registrant  and the release of the
Registrant from any and all liability  thereunder  (other than under the related
stock  option  and  restricted  stock  agreements  which  would be  modified  as
described  below) including  the  waiver by Shlomie  Morgenstern  of any and all
severance or change of control  payments to which he would have been entitled to
thereunder.

            (b) Amendment of the option and restricted  stock agreements between
the  Registrant  and  Sholmie  Morgenstern  to provide for  acceleration  of any
unvested  grants on the  closing of the  Transactions  and for all options to be
exercisable through 18 months from the closing.

            (c) The assignment to and  assumption by Databit of the  obligations
of Registrant to George  Morgenstern under the Employment  Agreement between the
Registrant  and George  Morgenstern  dated  January 1, 1997, as amended (the "GM
Employment Agreement") upon the following terms:

                  (i) Reduction of the amounts owed to George  Morgenstern under
the GM  Employment  Agreement  by the lump sum payment  described  below and the
modifications to options and restricted stock agreements described below.

                  (ii) A release by George Morgenstern releasing Registrant from
any and all liability and obligations to him under the GM Employment  Agreement,
subject to a lump sum payment of $600,000.

<PAGE>

            (d) The assumption by Databit of the Registrant's  obligations under
the Registrant's leases for the premises in New York City and Mahwah, New Jersey
premises,  which provide for aggregate rents of approximately  $450,000 over the
next three years.

            (e) The delivery by John A. Moore and the other reporting persons on
the Schedule 13D dated June 30, 2005 (filed July 11, 2005) of consent agreements
manifesting approval of the Transactions and their fairness, and agreeing not to
institute  any claim  against the parties to the  Transactions  arising from the
Transactions, subject to the fulfillment of certain conditions specified in such
consents.

            (f) The amendment of the option  agreement  with George  Morgenstern
dated  December 30, 2004 to provide for the  acceleration  of the 60,000 options
that are not currently  vested and the extension of the exercise  period for all
options held by George  Morgenstern  to the later of (i) September 2009 and (ii)
18 months after the  cessation  of service  under the new  consulting  agreement
described below.

            (g) The amendment of the Restricted Stock Agreement dated August 31,
1998 between George Morgenstern and the Registrant to provide for the removal of
any  vesting   conditions  from  the  20,000  shares  still  subject  to  such
conditions.

            (h) Execution and delivery by George  Morgenstern and the Registrant
of a new  consulting  agreement  for a period of two  years,  pursuant  to which
George  Morgenstern would serve as a consultant to the Registrant,  primarily to
assist in the management of the Registrant's  dsIT  subsidiary,  which agreement
will provide for compensation of $1.00 per year plus a  non-accountable  expense
allowance  of  $65,000  per year to cover  expected  costs of  travel  and other
expenses.

      In  connection  with  its  approval  of the  Transactions,  the  Board  of
Directors of the  Registrant  also approved the  following:  (i) the call of the
2006 annual meeting of the  stockholders  for as soon as  practicable;  (ii) the
appointment of John A. Moore as the Registrant's  representative on the Board of
Directors of Comverge Inc.; and (iii) the creation of a Nominations Committee to
select  the slate of  nominees  to appear on the  management  proxy for the 2006
annual  shareholder  meeting  and the  appointment  of John A.  Moore and George
Morgenstern to such committee.

      The Transactions were approved by a special committee  comprised  only  of
independent directors of the Board acting with the advice of a financial advisor
and special counsel engaged by the committee.

      The foregoing description is qualified in its entirety by reference to the
agreements  filed  as  exhibits  herewith,  which  are  incorporated  herein  by
reference.

            2. Changes of Executive Officers; Board of Directors.  Effective the
consummation of the Transactions,  (i) George  Morgenstern  ceased to serve as a
President  and CEO of the  Registrant  but will continue to serve as a member of
the Board of Directros  and as Chairman of the Board,  (ii)  Shlomie  Morgentern
ceased to serve as Vice  President--Operations  of the Registrant will no longer
act as an  officer or  director  of any of its  subsidiaries,  and (iii) John A.
Moore was appointed  President and Chief Executive  Officer and as a director of
the Registrant.

                                      -2-
<PAGE>

      3. Biographical  Information for John A. Moore. Mr. Moore is the President
and founder of Wilmington Scientific and of Edson Moore Healthcare Ventures. Mr.
Moore has led a diverse career in investment  banking,  private  venture capital
and business management.  He is an active investor in emerging growth companies.
He is currently President of Edson Moore Healthcare Ventures which he founded to
acquire $150 million of drug delivery assets from Elan  Pharmaceuticals in 2002.
He was Chairman and EVP of ImaRx  Therapeutics  from  February  2004 to February
2006. He was Chairman of Elite Pharmaceuticals  (AMEX-ELI) from February 2003 to
October  2004.  He is currently  Chairman of Optimer,  Inc. a consumer  products
company and a Director of ImaRx Therapeutics,  AGI Dermatics,  Voltaix, Inc. and
Medihut  (MHUT.PK).  Mr. Moore has a B.A. in History of  Economics  from Rutgers
University.



                                      -3-
<PAGE>

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(b)   Pro forma financial information

      The required pro forma financial information will be provided by amendment
      as  soon  as  practicable  after  release  of the  Registrant's  financial
      statements for the year ended December 31, 2005.

(d)   Exhibits

      10.1  Stock  Purchase  Agreement  dated as of March 9, 2006 by and between
            Shlomie Morgenstern, Databit Inc., and Data Systems & Software Inc.

      10.2  Termination  and Release  Agreement dated as of March 9, 2006 by and
            between  Shlomie  Morgenstern  and  Data  Systems  &  Software  Inc.
            (included as Exhibit A to the Stock Purchase Agreement).

      10.3  Amendment Agreement to GM Employment  Agreement dated as of March 9,
            2006 by and between George  Morgenstern  and Data Systems & Software
            Inc. (included as Exhibit B to the Stock Purchase Agreement).

      10.4  Amendment  Agreement to Purchaser  Option  Agreements and Restricted
            Stock  Award  Agreement  dated as of March  9,  2006 by and  between
            Shlomie  Morgenstern  and Data Systems & Software Inc.  (included as
            Exhibit C to the Stock Purchase Agreement).

      10.5  Amendment  Agreement to GM Option  Agreements and  Restricted  Stock
            Agreement date March 9, 2006 by and between George  Morgenstern  and
            Data  Systems & Software  Inc.  (included  as Exhibit D to the Stock
            Purchase Agreement).

      10.6  Consulting  Agreement  dated  March 9,  2006 by and  between  George
            Morgenstern and Data Systems & Software Inc.  (included as Exhibit E
            to the Stock Purchase Agreement).

      10.7  Form of  Consent  Agreement  (included  as  Exhibit  F to the  Stock
            Purchase Agreement).


                                      -4-
<PAGE>

                                   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 16th day of March 2006.


                                        DATA SYSTEMS & SOFTWARE INC.


                                        By: /s/ Michael Barth
                                           -------------------------------------
                                        Name:   Michael Barth
                                        Title:  Chief Financial Officer













                                      -5-
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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) March 10, 2006

                          DATA SYSTEMS & SOFTWARE INC.
           (Exact name of Registrants as Specified in their Charters)

           Delaware                    0-19771                  22-2786081
-----------------------------   -------------------------   --------------------
(States or Other Jurisdiction   (Commission file Numbers)     (IRS Employer
     of Incorporation)                                      Identification Nos.)

                   200 Route 17, Mahwah, New Jersey      07430
             ----------------------------------------  ----------
             (Address of Principal Executive Offices)  (Zip Code)

        Registrants' 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:

|_|   Written  communications  pursuant to Rule 425 under the Securities Act (17
      CFR 230.425)

|_|   Soliciting  material pursuant to Rule 14a-2 under the Exchange Act (17 CFR
      240.14a-2)

|_|   Pre-commencement  communications  pursuant  to  Rule  14d-2(b)  under  the
      Exchange Act (17 CFR 240.14d-2(b))

|_|   Pre-commencement  communications  pursuant  to  Rule  13e-4(c)  under  the
      Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into Material Definitive Agreement.

Item 1.02. Termination of a Material Definitive Agreement

Item 2.01. Completion of Acquisition or Disposition of Assets

Item 5.02. Departure of Directors or Principal Officers;  Election of Directors;
Appointment of Principal Officers.

      1. Sale of Databit Subsidiary; Related Transactions. On March 10, 2006 the
Registrant  entered into a Stock  Purchase  Agreement  dated as of March 9, 2006
(the "Stock Purchase  Agreement"),  for the sale of all the outstanding  capital
stock  of its  Databit  Inc.  subsidiary  ("Databit")  to  Shlomie  Morgenstern,
President of Databit and a Vice President of the  Registrant.  The  transactions
contempalted under the SPA, and the related transactions to which the Regstrant,
Shlomie Morgenstern and George Morgenstern were party and which are described in
this Report  (collectively,  the  "Transactions"), were consummated on March 10,
2006.

      The closing of the Transactions was  conditioned,  among other things,  on
the following:

            (a) Termination of the Employment  Agreement  dated  August 19, 2004
among Shlomie  Morgenstern,  Databit and the  Registrant  and the release of the
Registrant from any and all liability  thereunder  (other than under the related
stock  option  and  restricted  stock  agreements  which  would be  modified  as
described  below) including  the  waiver by Shlomie  Morgenstern  of any and all
severance or change of control  payments to which he would have been entitled to
thereunder.

            (b) Amendment of the option and restricted  stock agreements between
the  Registrant  and  Sholmie  Morgenstern  to provide for  acceleration  of any
unvested  grants on the  closing of the  Transactions  and for all options to be
exercisable through 18 months from the closing.

            (c) The assignment to and  assumption by Databit of the  obligations
of Registrant to George  Morgenstern under the Employment  Agreement between the
Registrant  and George  Morgenstern  dated  January 1, 1997, as amended (the "GM
Employment Agreement") upon the following terms:

                  (i) Reduction of the amounts owed to George  Morgenstern under
the GM  Employment  Agreement  by the lump sum payment  described  below and the
modifications to options and restricted stock agreements described below.

                  (ii) A release by George Morgenstern releasing Registrant from
any and all liability and obligations to him under the GM Employment  Agreement,
subject to a lump sum payment of $600,000.
(d) The assumption by Databit of the Registrant's  obligations under
the Registrant's leases for the premises in New York City and Mahwah, New Jersey
premises,  which provide for aggregate rents of approximately  $450,000 over the
next three years.

            (e) The delivery by John A. Moore and the other reporting persons on
the Schedule 13D dated June 30, 2005 (filed July 11, 2005) of consent agreements
manifesting approval of the Transactions and their fairness, and agreeing not to
institute  any claim  against the parties to the  Transactions  arising from the
Transactions, subject to the fulfillment of certain conditions specified in such
consents.

            (f) The amendment of the option  agreement  with George  Morgenstern
dated  December 30, 2004 to provide for the  acceleration  of the 60,000 options
that are not currently  vested and the extension of the exercise  period for all
options held by George  Morgenstern  to the later of (i) September 2009 and (ii)
18 months after the  cessation  of service  under the new  consulting  agreement
described below.

            (g) The amendment of the Restricted Stock Agreement dated August 31,
1998 between George Morgenstern and the Registrant to provide for the removal of
any  vesting   conditions  from  the  20,000  shares  still  subject  to  such
conditions.

            (h) Execution and delivery by George  Morgenstern and the Registrant
of a new  consulting  agreement  for a period of two  years,  pursuant  to which
George  Morgenstern would serve as a consultant to the Registrant,  primarily to
assist in the management of the Registrant's  dsIT  subsidiary,  which agreement
will provide for compensation of $1.00 per year plus a  non-accountable  expense
allowance  of  $65,000  per year to cover  expected  costs of  travel  and other
expenses.

      In  connection  with  its  approval  of the  Transactions,  the  Board  of
Directors of the  Registrant  also approved the  following:  (i) the call of the
2006 annual meeting of the  stockholders  for as soon as  practicable;  (ii) the
appointment of John A. Moore as the Registrant's  representative on the Board of
Directors of Comverge Inc.; and (iii) the creation of a Nominations Committee to
select  the slate of  nominees  to appear on the  management  proxy for the 2006
annual  shareholder  meeting  and the  appointment  of John A.  Moore and George
Morgenstern to such committee.

      The Transactions were approved by a special committee  comprised  only  of
independent directors of the Board acting with the advice of a financial advisor
and special counsel engaged by the committee.

      The foregoing description is qualified in its entirety by reference to the
agreements  filed  as  exhibits  herewith,  which  are  incorporated  herein  by
reference.

            2. Changes of Executive Officers; Board of Directors.  Effective the
consummation of the Transactions,  (i) George  Morgenstern  ceased to serve as a
President  and CEO of the  Registrant  but will continue to serve as a member of
the Board of Directros  and as Chairman of the Board,  (ii)  Shlomie  Morgentern
ceased to serve as Vice  President--Operations  of the Registrant will no longer
act as an  officer or  director  of any of its  subsidiaries,  and (iii) John A.
Moore was appointed  President and Chief Executive  Officer and as a director of
the Registrant.

                                      -2-
3. Biographical  Information for John A. Moore. Mr. Moore is the President
and founder of Wilmington Scientific and of Edson Moore Healthcare Ventures. Mr.
Moore has led a diverse career in investment  banking,  private  venture capital
and business management.  He is an active investor in emerging growth companies.
He is currently President of Edson Moore Healthcare Ventures which he founded to
acquire $150 million of drug delivery assets from Elan  Pharmaceuticals in 2002.
He was Chairman and EVP of ImaRx  Therapeutics  from  February  2004 to February
2006. He was Chairman of Elite Pharmaceuticals  (AMEX-ELI) from February 2003 to
October  2004.  He is currently  Chairman of Optimer,  Inc. a consumer  products
company and a Director of ImaRx Therapeutics,  AGI Dermatics,  Voltaix, Inc. and
Medihut  (MHUT.PK).  Mr. Moore has a B.A. in History of  Economics  from Rutgers
University.

                                      -3-
Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(b)   Pro forma financial information

      The required pro forma financial information will be provided by amendment
      as  soon  as  practicable  after  release  of the  Registrant's  financial
      statements for the year ended December 31, 2005.

(d)   Exhibits

      10.1  Stock  Purchase  Agreement  dated as of March 9, 2006 by and between
            Shlomie Morgenstern, Databit Inc., and Data Systems & Software Inc.

      10.2  Termination  and Release  Agreement dated as of March 9, 2006 by and
            between  Shlomie  Morgenstern  and  Data  Systems  &  Software  Inc.
            (included as Exhibit A to the Stock Purchase Agreement).

      10.3  Amendment Agreement to GM Employment  Agreement dated as of March 9,
            2006 by and between George  Morgenstern  and Data Systems & Software
            Inc. (included as Exhibit B to the Stock Purchase Agreement).

      10.4  Amendment  Agreement to Purchaser  Option  Agreements and Restricted
            Stock  Award  Agreement  dated as of March  9,  2006 by and  between
            Shlomie  Morgenstern  and Data Systems & Software Inc.  (included as
            Exhibit C to the Stock Purchase Agreement).

      10.5  Amendment  Agreement to GM Option  Agreements and  Restricted  Stock
            Agreement date March 9, 2006 by and between George  Morgenstern  and
            Data  Systems & Software  Inc.  (included  as Exhibit D to the Stock
            Purchase Agreement).

      10.6  Consulting  Agreement  dated  March 9,  2006 by and  between  George
            Morgenstern and Data Systems & Software Inc.  (included as Exhibit E
            to the Stock Purchase Agreement).

      10.7  Form of  Consent  Agreement  (included  as  Exhibit  F to the  Stock
            Purchase Agreement).

                                      -4-
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 16th day of March 2006.

                                        DATA SYSTEMS & SOFTWARE INC.

                                        By: /s/ Michael Barth
                                           -------------------------------------
                                        Name:   Michael Barth
                                        Title:  Chief Financial Officer

                                      -5-