SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                         AMENDMENT NO. 1 ON FORM 10-K/A
                          TO ANNUAL REPORT ON FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2003

                         COMMISSION FILE NUMBER: 0-19771

                          DATA SYSTEMS & SOFTWARE INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

               DELAWARE                                       22-2786081
    (State or other jurisdiction of )                     (I.R.S. Employer
      incorporation or organization                       Identification No.)

                     200 ROUTE 17, MAHWAH, NEW JERSEY 07430
               (Address of principal executive offices) (Zip Code)

                                 (201) 529-2026
               Registrant's telephone number, including area code

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                          COMMON STOCK PURCHASE RIGHTS
                                (TITLE OF CLASS)

          Indicate  by check  mark  whether  the  registrant  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. / /

         The aggregate  market value of the common stock held by  non-affiliates
of the  registrant  at March  29,  2004 was  approximately  $23.7  million.  The
aggregate market value was calculated by using the closing price of the stock on
that date on the Nasdaq SmallCap Market.

          Number of shares  outstanding of the registrant's  common stock, as of
March 29, 2004: 7,902,025.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      None.

<PAGE>




                          DATA SYSTEMS & SOFTWARE INC.
                         AMENDMENT NO. 1 ON FORM 10-K/A
                          TO ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----

PART III

<S>                                                                                                              <C>
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................................................1

ITEM 11.  EXECUTIVE AND DIRECTOR COMPENSATION.....................................................................3

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS..........7

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................................9

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.................................................................10

                  SIGNATURES.....................................................................................11
</TABLE>

<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGERS

         Set  forth  below is  certain  information  concerning  our  directors,
executive officers and key managers:

<TABLE>
<CAPTION>

NAME                                  AGE         POSITION
----                                  ---         --------

<S>                                   <C>         <C>
George Morgenstern                    70          Director,   Chairman  of  the  Board,  President  and  Chief
                                                  Executive  Officer;  Chairman  of  the  Board  of  our  dsIT
                                                  Technologies  Ltd.  subsidiary  (formerly  Decision  Systems
                                                  Israel Ltd.) ("dsIT"); and director of Comverge, Inc. ("Comverge")

Avi Kerbs                             56          Director

Elihu Levine                          71          Director

Shane Yurman                          56          Director

Shlomie Morgenstern                   41          Vice President-Operations

Jacob Neuwirth                        57          Chief Executive Officer and President of dsIT

Yacov Kaufman                         46          Vice President and Chief Financial Officer; and Vice President
                                                  and Chief Financial Officer of dsIT
</TABLE>

          GEORGE MORGENSTERN has been our Chairman of the Board since June 1993,
and has been our President and Chief Executive  Officer since our  incorporation
in 1986.  Mr.  Morgenstern  also serves as Chairman of the Board of dsIT, and as
director of Comverge.  Mr. Morgenstern was the Chairman of the Board of Comverge
from October 1997 to April 2003.

          AVI KERBS has  served as one of our  directors  since  December  2002.
Since 1991,  Mr.  Kerbs has been the Chief  Executive  Officer and  President of
Teuza  Management and Development  1991 Ltd., a company that manages a family of
Israeli  venture  capital  funds.  Mr.  Kerbs is a  director  of Nova  Measuring
Instruments Ltd.

          ELIHU LEVINE has been one of our directors since April 2003. From 1992
to his  retirement  in January  1997,  Mr. Levine was an officer and employed in
various executive capacities by International Data Operations,  Inc., one of our
subsidiaries.  Mr. Levine also served as a director of Tower  Semiconductor Ltd.
from March 1997 to January 2000.

         SHANE  YURMAN  has been one of our  directors  since  April  2003.  Mr.
Yurman, a certified  public  accountant,  has been engaged in public  accounting
since 1971. Mr. Yurman is a member of the American Institute of Certified Public
Accountants and the New York State Society of Certified Public Accountants where
he  previously  served  as a member of the  Auditing  Standards  and  Procedures
Committee.

         SHLOMIE  MORGENSTERN  has  been  our  Vice  President-Operations  since
February  2000 and was one of our directors  from  November 2001 until  December
2002. Mr. Morgenstern also serves as President of our Databit subsidiary.  Since
1996,  Mr.  Morgenstern  has  been  employed  by  us in  various  administrative
capacities.  Mr. Morgenstern is the son of George  Morgenstern,  our Chairman of
the Board, President and Chief Executive Officer.

         JACOB NEUWIRTH has been Chief  Executive  Officer and President of dsIT
since December 2001.  From 1994 to 2001, he was the President and the founder of
Endan IT  Solutions  Ltd.,  an Israeli IT  solutions  provider  specializing  in
billing and  healthcare  IT  solutions,  which was  acquired by dsIT in December
2001.


                                       1
<PAGE>

         YACOV KAUFMAN has been our Executive Vice President since December 2001
and our Chief Financial Officer since February 1996. Mr. Kaufman has also served
as a Vice  President of dsIT since 1992 and as Chief  Financial  Officer of dsIT
since 1990, having served as Controller of dsIT since 1986.

AUDIT COMMITTEE

         We have an  Audit  Committee  that  was  established  by our  Board  of
Directors for the purpose of overseeing our  accounting and financial  reporting
processes and audits of our financial  statements by our  independent  auditors.
The members of the Audit  Committee  are Messrs.  Yurman  (Chairman),  Kerbs and
Levine.  Each of the members of the Audit Committee meets the  independence  and
experience  requirements  of  Marketplace  Rule  4350(d)(2)  of the NASDAQ Stock
Market, Inc.

AUDIT COMMITTEE FINANCIAL EXPERT

         Our Board has  determined  that Mr. Shane  Yurman,  the Chairman of our
Audit Committee, is an "audit committee financial expert" as defined in Item 401
of Regulation  S-K. Mr. Yurman is independent in accordance  with SEC and Nasdaq
listing standards applicable to our company.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section  16(a) of the  Securities  Exchange Act of 1934 (the  "Exchange
Act") requires our executive  officers and  directors,  and persons who own more
than 10% of a  registered  class of our  equity  securities  to file  reports of
ownership and changes in ownership with the SEC. These persons are also required
by SEC  regulation  to furnish us with  copies of all  Section  16(a) forms they
file.  Based  solely  on its  review of such  forms  received  by us or  written
representations  from certain  reporting  persons,  except as described below we
believe that during 2003 all applicable  filing  requirements were complied with
by its executive officers and directors.

         Mr. Kerbs failed to timely file one Form 4 covering the  acquisition of
7,500 stock  options  granted by the Company to Mr. Kerbs  pursuant to an annual
formula  grant in December  2003.

CODE OF ETHICS

         We  have  adopted  a code  of  ethics  that  applies  to our  principal
executive officer, principal financial officer, and principal accounting officer
or controller,  and/or persons performing similar functions.  Our code of ethics
has previously been filed as an exhibit to this Annual Report.

ITEM 11.  EXECUTIVE AND DIRECTOR COMPENSATION

EXECUTIVE COMPENSATION

       The  following  table sets forth for the  periods  indicated  information
concerning the  compensation of our Chief  Executive  Officer and the four other
officers who received in excess of $100,000 in salary and bonus during 2003 (the
"named executive officers"):


                                       2
<PAGE>

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                        Long Term                   All Other
                                                    Annual Compensation           Compensation Awards            Compensation ($)
                                                    -------------------           -------------------            ----------------
                                                                                               Securities
Name and                                                                   Restricted Stock    Underlying
Principal Position                 Year         Salary ($)     Bonus ($)      Awards ($)        Options (#)
------------------                 ----        ----------     ---------      ----------        -----------

<S>                                <C>            <C>           <C>              <C>               <C>            <C>
George Morgenstern                 2003           464,250           --                             --              177,825(1)
Chief Executive Officer            2002           465,700           --           --                --              182,860
                                   2001           446,351        150,000         --                --              187,721


Yacov Kaufman                      2003           182,942           --           --                --               49,901(2)
Chief Financial Officer            2002           170,294           --           --                --               37,899
                                   2001           158,403         50,000         --                --               48,400

Shlomie Morgenstern                2003           210,800         50,000         --                --               14,045(3)
Vice President                     2002           204,345         15,000         --                --                7,440
                                   2001           193,500           --           --                --                 --

Jacob Neuwirth                     2003           154,963         83,694         --                --               44,290(2)
Chief Executive Officer            2002           174,512           --           --                --               39,788
and President of dsIT              2001              --             --           --                --                 --
</TABLE>

-------------
(1)   Consists of (i) $118,560 in  contributions  to a non-qualified  retirement
      fund,  (ii) $28,000 in life  insurance  premiums,  (iii)  $18,200 paid for
      accrued  vacation,  (iv) $5,000 in director's  fees and (v) $8,065 imputed
      value of automobile fringe benefits.

(2)   Represents  primarily  contributions  to severance  and pension  funds and
      automobile  fringe benefits.  Contributions to severance and pension funds
      are made on  substantially  the same  basis as  those  made on  behalf  of
      Israeli executives.

(3)   Consists of $12,115 paid for accrued  vacation and $1,930 imputed value of
      automobile fringe benefits.



                                       3
<PAGE>


                            OPTION/SAR GRANTS IN 2003

      We did not grant any stock options or stock appreciation  rights (SARs) in
2003 to any of the named executive officers.

                       AGGREGATED OPTION EXERCISES IN 2003
                     AND FISCAL YEAR END STOCK OPTION VALUES

<TABLE>
<CAPTION>
                            Number of
                             Shares                  Number of Securities Underlying
                            Acquired                        Unexercised Options               Value of Unexercised
                              Upon         Value              At Year End (#)             In-the-money Options ($) (1)
                            Exercise     Realized            -----------------            ----------------------------
           Name                (#)          ($)          Exercisable      Unexercisable    Exercisable   Unexercisable
           ----             ---------    --------        -----------      -------------    -----------   -------------

<S>                             <C>          <C>           <C>                  <C>         <C>               <C>
George Morgenstern              --           --            497,250              --             --              --

Yacov Kaufman                   --           --            205,000              --           112,550           --

Shlomie Morgenstern             --           --            55,000               --           18,525            --
</TABLE>
-------------

(1)   Based on the closing  price for our common  stock on December  31, 2003 of
      $3.43 per share.

COMPENSATION OF DIRECTORS

         Each of our  directors  is  generally  paid  $1,000  for each  Board or
committee meeting which he or she attends (except if a committee meeting is held
on  the  same  day  as  a  Board  meeting)  and  is  reimbursed  for  associated
out-of-pocket  expenses. Mr. Kerbs and Mr. Levine are each paid $6,000 per annum
plus  meeting  fees in  connection  with  their  service  on the Board and Audit
Committee.  Mr.  Yurman is paid  $20,000  per annum  plus  meeting  fees for his
service on the Board and as Chairman of the Audit Committee.  In 2003, Mr. Kerbs
was paid a total of $11,000,  Mr. Yurman was paid a total of $21,333, Mr. Levine
was paid a total of $6,000,  and Mr.  Morgenstern  was paid a total of $5,000 in
connection with their respective service on the Board and/or Audit Committee.

         Our 1994 Stock Option Plan for Outside Directors provides for awards of
non-qualified  options to our  directors who are not one of our employees or any
of our affiliates and who meet certain other eligibility  criteria.  Pursuant to
the plan, (i) upon first election or appointment to the Board of Directors, each
newly  elected or appointed  eligible  director is granted an option to purchase
7,500  shares of our common  stock and (ii)  immediately  following  each of our
Annual Meeting of Stockholders, each eligible director will generally be granted
an option to purchase  7,500 shares of our common stock.  Options  granted under
the plan have an exercise  price per share equal to the fair market value of our
common stock on the date of issuance and are exercisable  beginning on the first
anniversary  of the date of the grant  until the  earliest of (i) ten years from
the date of grant, (ii) one year from the date on which an optionee ceases to be
an  eligible  director  and (iii) 90 days  after the date on which the  optionee
ceases to be a  director.  The maximum  number of shares of our common  stock in
respect  of which  awards  may be granted  under the plan is  400,000,  of which
40,000 non-expired options are outstanding to date.

         In addition to the directors' fees described  above, at the last Annual
Meeting of Stockholders,  Mr. Kerbs was granted options to purchase 7,500 shares
of our common  stock at an exercise  price equal to the fair market value of our
common stock on the date of grant  (i.e.,  $2.74 per share).  Finally,  in April
2003,  Mr.  Yurman and Mr.  Levine were each granted  options to purchase  7,500
shares of our common  stock at an exercise  price equal to the fair market value
of our  common  stock on the date of grant  (i.e.,  $1.90 and  $2.02 per  share,
respectively). These options were granted pursuant to our 1994 Stock Option Plan
for Outside Directors described above.


                                       4
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         All  matters  related  to  the  compensation  of  executive   officers,
including  the Chief  Executive  Officer,  are acted  upon by the full  Board of
Directors.

         The following  person served both as a member of our Board of Directors
and as an officer or  employee  in 2003:  George  Morgenstern  (Chairman  of the
Board,  President and Chief  Executive  Officer).  During 2003, no member of the
Board  of  Directors  who  was  also  one of our  officers  participated  in any
deliberations of the Board of Directors or any committee thereof relating to his
own  compensation  or to the  compensation  of any person to whom he is related.
Except as described above, each member of the Board of Directors participated in
2003 in deliberations  of the Board of Directors  concerning  executive  officer
compensation. During 2003, George Morgenstern engaged in transactions with us in
which he was deemed to have an interest.  For further information,  see "Certain
Relationships and Related Transactions" below.

EMPLOYMENT ARRANGEMENTS

         George Morgenstern  serves as our Chairman of the Board,  President and
Chief Executive  Officer  pursuant to an employment  agreement that commenced on
January 1, 1997, was amended in March 2002 to extend through  December 31, 2003,
and  provides  for a period of  consultancy  thereafter  as set forth below (the
"Employment  Agreement").  Through  December 31, 2003, the Employment  Agreement
provided for a base salary of $420,000 per annum (which was $470,000 due to cost
of living adjustments as of December 31, 2003),  subject to annual review by the
Board  and  an  annual  cost  of  living  adjustment,  plus  contributions  to a
nonqualified  retirement fund equal to 25% of his base salary. Mr. Morgenstern's
compensation  pursuant to the Employment  Agreement also includes the use of two
company  automobiles,  premium  payments on a life insurance policy owned by Mr.
Morgenstern and other fringe benefits.

         Pursuant to the terms of the  Employment  Agreement,  on  December  31,
2003, Mr. Morgenstern elected to terminate his employment with us and thereafter
to continue to serve us as a consultant for a period (the  "Consulting  Period")
ending on December 31, 2010. At the request of the Board,  Mr.  Morgenstern  has
continued  on as our  Chairman  of the  Board,  President  and  Chief  Executive
Officer.  During the  Consulting  Period,  Mr.  Morgenstern  receives  an annual
consulting fee plus  contributions to a nonqualified  retirement fund and fringe
benefits  on the same basis as during the term of his  employment  as  described
above. Mr.  Morgenstern's  annual consulting fee during the Consulting Period is
equal to 50% of his annual salary in effect  immediately prior to the Consulting
Period  through  the end of the  fourth  full  calendar  year of the  Consulting
Period, and 25% of such annual salary for the remainder of the Consulting Period
(subject in all cases to an annual cost of living adjustment).

         Under the terms of the Employment Agreement, the Company agrees to take
appropriate  action to fund the payment of all consulting fees to become payable
to Mr.  Morgenstern  throughout the entire Consulting  Period, by purchase of an
annuity from a reputable  insurance  company,  deposit of funds or U.S. Treasury
Securities  having  maturities of less than one year in a bank acceptable to Mr.
Morgenstern, or other arrangements acceptable to Mr. Morgenstern. In March 2004,
Mr. Morgenstern agreed to waive this obligation,  except in the event of (i) his
death or disability,  (ii) the Company  entering into a definitive  agreement(s)
concerning a transaction or series of  transactions,  the  consummation of which
will  result in the  receipt  by the  Company of gross  proceeds  equal to or in
excess of $1 million or (iii) his termination as Chief Executive  Officer of the
Company for any reason other than his voluntary resignation. Upon the occurrence
of any of these events,  the Company  would be obligated to fund all  consulting
fees as provided in the Employment Agreement.  During the term of the Employment
Agreement (including any Consulting Period), Mr. Morgenstern may not engage in a
business that is in substantial and direct  competition with our business or the
business of any of our subsidiaries.

         Yacov Kaufman serves as Vice President and Chief  Financial  Officer of
the Company and as Executive Vice President and Chief Financial  Officer of dsIT
pursuant to an employment  agreement entered into with the Company on January 1,
1999,  and  amended in June 2002.  The  amendment  to Mr.  Kaufman's  employment
agreement  provides  for  an  increase  in  Mr.  Kaufman's  salary  to  $200,000
retroactive to January 1, 2002.


                                       5
<PAGE>

         We  make  certain  payments  to  fund  in  part  our  future  severance
obligations  to  Mr.  Kaufman.  If  Mr.  Kaufman's   employment  is  voluntarily
terminated or is terminated by us for reasons other than for cause,  we must pay
him an amount equal to 150% of his last month's salary  multiplied by the number
of  years  (including  partial  years)  that Mr.  Kaufman  worked  for us.  This
severance  obligation,  which is customary for executives of Israeli  companies,
would be reduced by the amount  contributed by us to certain Israeli pension and
severance funds pursuant to Mr. Kaufman's employment agreement. In addition, the
agreement with Mr. Kaufman provides for an additional payment equal to six times
his last month's total  compensation,  payable at the end of his employment with
us,  unless he is  terminated  by us for cause.  As of December  31,  2003,  the
unfunded portion of these payments was $57,000.

         The stock  option  agreements  with our  executive  officers  generally
provide for accelerated vesting in the event we have a change in control.

         Jacob Neuwirth serves as President and Chief Executive  Officer of dsIT
pursuant to an employment  agreement  that  commenced on December 16, 2001.  Mr.
Neuwirth's  employment agreement provides for a base salary which is denominated
in linked NIS equivalent to $165,000 per annum,  linked to the Israeli  Consumer
Price Index ("Index"). In addition, the agreement with Mr. Neuwirth provides for
six months  advance  notice of  termination of employment by either side, and an
additional  payment  equal to six times  his last  month's  total  compensation,
payable upon any  termination  of his  employment.  As of December 31, 2003, the
unfunded portion of these payments was $115,000.

         Under his employment  agreement,  Mr. Neuwirth is entitled to a loan of
up to $100,000 from dsIT. As of December 31, 2003 the loan, which is denominated
in linked NIS,  bears  interest  at 4% and has no fixed  maturity  date,  had an
outstanding balance of $54,000.


                                       6
<PAGE>

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

         The following table and the notes thereto set forth information,  as of
April 26, 2004 (except as otherwise noted),  concerning beneficial ownership (as
defined in Rule 13d-3 under the  Securities  Exchange Act of 1934) of our common
stock by (i) each of our directors, (ii) each of the "named executive officers,"
(iii) all of our  executive  officers and  directors  as a group,  and (iv) each
holder of 5% or more of our outstanding common stock:
<TABLE>
<CAPTION>

                                                           Number of Shares of            Percentage of
                Name and Address of                            Common Stock                Common Stock
              Beneficial Owner(1)(2)                      Beneficially Owned(2)           Outstanding(2)
              ----------------------                      ---------------------           --------------
          <S>                                                   <C>                           <C>
          George Morgenstern                                    464,637(3)                    5.6%
          Howard A. Gutzmer                                     676,291(4)                    8.6%
              5550 Oberlin Drive
              San Diego, CA  92121

          Dimensional Fund Advisors Inc.                        403,600(5)                    5.1%
              1299 Ocean Avenue
              Santa Monica, CA 90401

          Laurus Master Fund, Ltd.                              315,000(6)                    3.8%
              c/o Ironshore Corporate Services Ltd.
              P.O. Box 1234 G.T
              Queensgate House
              South Church Street
              Grand Cayman, Cayman Islands

          Avi Kerbs                                               7,500(7)                     *
          Elihu Levine                                           78,470(8)                    1.0%
          Shane Yurman                                            7,500(7)                     *
          Shlomie Morgenstern                                    56,000(9)                     *
          Yacov Kaufman                                         205,000(7)                    2.5%
          Jacob Neuwirth                                         57,870                        *
          All executive officers and directors of the
          Company as a group (7 people)                         876,977                      10.2%
</TABLE>

-----------------

*     Denotes  less than 1% of the  issued and  outstanding  common  stock.

(1)   Unless otherwise indicated, business address is in care of the Company.

(2)   Unless  otherwise  indicated,  each person has sole  investment and voting
      power with respect to the shares indicated.  For purposes of this table, a
      person or group of persons is deemed to have "beneficial ownership" of any
      shares as of a given  date  which  such  person  has the right to  acquire
      within 60 days  after such date.  Percentage  information  is based on the
      number of shares outstanding as of April 20, 2004.

(3)  Consists of (i) 61,854  shares held by Mr.  Morgenstern,  including  20,000
     shares  received by Mr.  Morgenstern  pursuant to a restricted  stock grant
     which are not yet fully vested, (ii) 380,583 currently  exercisable options
     held by Mr. Morgenstern, and (iii) 22,200 shares owned by Mr. Morgenstern's
     wife.

(4)  As of  December  31,  2003,  based on  information  in  Amendment  No. 2 to
     Schedule 13G filed on January 27, 2003. Consists of (i) 60,340 shares owned
     by Mr.  Gutzmer  (including  shares held in his IRA);  (ii) 508,125  shares
     owned by the Gutzmer  Family Trust,  of which Mr.  Gutzmer is a co-trustee;
     (iv) 64,950 shares held in an IRA of Mr.  Gutzmer's wife; (v) 37,576 shares
     owned by a  corporation  of which  Mr.  Gutzmer  is an  executive  officer,
     director  and  principal  shareholder;  and (vi)  5,300  shares  owned by a
     limited partnership,  the corporate general partner of which Mr. Gutzmer is
     the sole director.

(5)  As of December 31, 2003,  based on  information in an amendment to Schedule
     13G filed on February 6, 2004. The securities are owned by four  investment
     company  funds to which  Dimensional  Fund  Advisors  Inc.  ("Dimensional")
     furnishes  investment  advice and/or serves as investment  manager.  In its
     role as investment advisor or manager,  Dimensional possesses voting and/or
     investment  power over the  securities.  Dimensional  disclaims  beneficial
     ownership of these securities.


                                       7
<PAGE>

(6)  As of April 21, 2004,  based on information  known to us. Consists of a (i)
     three-year  warrant  issued in June 2002  exercisable  to purchase  125,000
     shares of our common stock at an exercise price of $4.20 per share and (ii)
     five-year  warrant issued in December 2002  exercisable to purchase 190,000
     shares of our common stock of which 30,000 shares are  exercisable at $2.00
     per share,  60,000  shares are  exercisable  at $2.34 per share and 100,000
     shares are exercisable at $3.34 per share. Laurus has contractually  agreed
     to restrict  its ability to exercise its  warrants if such  exercise  would
     result in Laurus and its affiliates  beneficially owning more than 4.99% of
     the then issued and outstanding shares of common stock.

(7)  Consists of currently exercisable options.

(8)  Consists of (i) 40,000  shares owned by Mr.  Levine and his wife in a joint
     account, (ii) 1,180 shares held in an IRA of Mr. Levine, (iii) 8,000 shares
     owned  by Mr.  Levine's  wife,  (iv)  1,790  shares  held  in an IRA of Mr.
     Levine's  wife and (v) 27,500  currently  exercisable  options  held by Mr.
     Levine.

(9)  Consists of 1,000 shares and 55,000 currently exercisable options.

                      EQUITY COMPENSATION PLAN INFORMATION
<TABLE>
<CAPTION>

                                                                                        Number of securities
                                                                                       remaining available for
                                                                                        future issuance under
                                    Number of securities to      Weighted-average        equity compensation
                                    be issued upon exercise     exercise price of         plans (excluding
                                    of outstanding options,    outstanding options,    securities reflected in
                                      warrants and rights      warrants and rights           column (a))
                                      -------------------      -------------------           -----------

              Plan category                   (a)                      (b)                       (c)
        --------------------------------------------------------------------------------------------------------
        <C>                          <C>                              <C>               <C>
        Equity compensation plans
        approved by security
        holders                             817,750                   $5.32                   2,421,325
        Equity compensation plans
        not approved by security
        holders                             488,301                   $4.00                    929,616
                                   --------------------------                         --------------------------
                  TOTAL                    1,308,051                  $4.83                   3,350,941
                                   --------------------------                         --------------------------
</TABLE>

         Our  equity  compensation  plan  that  has  not  been  approved  by our
stockholders is the 1995 Stock Option Plan for Nonmanagement Employees, which we
adopted in April 1995.  The 1995 Plan  provides  for the  awarding of options to
purchase our common stock to certain of our employees  and officers  (other than
executive  officers  and  directors)  and others who render  services to us. The
maximum  number of shares of common stock that can be issued under the 1995 Plan
is 1,417,917.  As of December 31, 2003,  456,401  options had been awarded under
this plan.  No shares may be awarded  under the 1995 plan after April 18,  2005.
The exercise  price of each option,  the period  during which each option may be
exercised and other terms and  conditions  of each option are  determined by the
Board (or by a committee  appointed by the Board).  The 1995 Plan also  provides
that our Chief  Executive  Officer may award up to 75,000 options and act as the
committee  with respect to those  options to determine the exercise  price,  the
exercise  period and other  terms and  conditions  of  options he grants.  As of
December 31,  2003,  our Chief  Executive  Officer has granted a total of 48,000
options under the 1995 Plan.


                                       8
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During 2003, we paid approximately $403,000 for legal services rendered
and  reimbursement  of out-of-pocket  expenses to Ehrenreich  Eilenberg & Krause
LLP, a law firm in which Sheldon Krause, a former director and our Secretary, is
a member. Such fees related to services rendered by Mr. Krause and other members
and employees of his firm, as well as certain special and local counsel retained
and supervised by his firm who performed  services on our behalf.  Mr. Krause is
the  son-in-law  of  George  Morgenstern,  our  Chairman,  President  and  Chief
Executive Officer.

         As  reported  on  the  Summary   Compensation   Table  above,   Shlomie
Morgenstern,  the son of George Morgenstern,  our Chairman,  President and Chief
Executive  Officer,  received  compensation  during 2003 in connection  with his
position as Vice President-Operations.

         In  July  2001,  we  entered  in  an  arrangement  with  a  corporation
wholly-owned by George Morgenstern,  our Chairman, President and Chief Executive
Officer,  for use by such corporation of approximately  400 of the approximately
4,650 square feet leased by us in New York City.  Based on our lease for our New
York City premises, the pro rata full rental cost (including electricity) of the
portion of the premises utilized by the corporation was approximately $1,450 per
month.   In  October  2002,  we  entered  into  a  written   agreement  for  the
corporation's use of its portion of the premises. The agreement provided for the
payment to us of $2,000 per month and was  terminable by either party on 60 days
written  notice to the other.  Upon notice  provided to us in February 2003, the
corporation  vacated the space in April 2003.  During 2003 we received $6,000 of
rent from this corporation.

         In January 2000,  Comverge extended loans of $9,925 each evidenced by a
promissory note to both our Chief Executive  Officer and Chief Financial Officer
to finance  the  purchase  of Comverge  common  stock.  The loans had an initial
maturity  date of  January 3, 2002 and were  extended  at that time to mature on
January  3,  2004.  The loans  bear  interest  at 4.25% per  annum,  payable  at
maturity.  In April  2004,  the  Board  approved  a bonus  to each of the  Chief
Executive Officer and Chief Financial Officer in the amount of $13,000. In April
2004, the loans were paid off in full by the Chief  Executive  Officer and Chief
Financial Officer.

         dsIT's Chief Executive  Officer has a loan  outstanding  from dsIT that
originated in 2001.  The loan balance and accrued  interest at December 31, 2003
was $54,000.  The loan has no defined  maturity  date, is denominated in NIS, is
linked to the Index and bears interest at 4%.


                                       9
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

ACCOUNTING FEES

         Aggregate fees billed by our principal  accountant  during the last two
fiscal years are as follows:

                                             2002             2003
                                         -------------    -------------
       Audit Fees                            $143,000         $146,000
       Audit- Related Fees                     60,000           58,000
       Tax Fees                                 7,000            7,000
       Other Fees                                  --               --
                                         -------------    -------------
       Total                                 $210,000         $211,000
                                         =============    =============

         AUDIT  FEES for the years  ended  December  31,  2003 and 2002 were for
professional  services  rendered  for the audits of the  consolidated  financial
statements of the Company,  statutory and  subsidiary  audits,  assistance  with
review of documents filed with the SEC, consents,  and other assistance required
to be performed by our independent accountants.

         AUDIT RELATED FEES for the years ended  December 31, 2003 and 2002 were
for assurance and related  services,  internal  control  reviews and attestation
services.

         TAX  FEES for the  years  ended  December  31,  2003 and 2002  were for
services  related to tax  compliance,  tax  planning and tax advice for our dsIT
subsidiary.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

         The Audit  Committee's  current policy is to pre-approve  all audit and
non-audit  services  that  are to be  performed  and fees to be  charged  by our
independent  auditor to assure that the  provision  of these  services  does not
impair the  independence  of the auditor.  The Audit Committee was in compliance
with  the  requirements  of  the   Sarbanes-Oxley  Act  of  2002  regarding  the
pre-approval  of all  audit  and  non-audit  services  and fees by the  mandated
effective date of May 6, 2003.


                                       10
<PAGE>

                                    SIGNATURE

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned,  thereunto duly authorized, in the Township of
Mahwah, State of New Jersey, on April 29, 2004.

                                        DATA SYSTEMS & SOFTWARE INC.

                                        By: /S/ GEORGE MORGENSTERN
                                           -----------------------------------
                                           George Morgenstern,
                                           Chief Executive Officer and President