<PAGE>



                       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, 2002

                         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 Identification No.)
  incorporation or organization)

                     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  31,  2003 was  approximately  $19.1  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 31, 2003: 7,391,363.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      None.


<PAGE>

<TABLE>
<CAPTION>

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


                                                  TABLE OF CONTENTS

                                                                                                     PAGE
                                                                                                     ----
<S>                                                                                                    <C>

PART III

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....................................................................9

Item 13.          Certain Relationships and Related Transactions........................................11

                  Signatures............................................................................12





</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                   69          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 our Comverge, Inc. subsidiary (formerly
                                                  Comverge Technologies, Inc.) ("Comverge")

 Avi Kerbs                            55          Director

 Elihu Levine                         70          Director

 Shane Yurman                         55          Director

 Shlomie Morgenstern                  40          Vice President-Operations

 Jacob Neuwirth                       56          Chief Executive Officer and President of dsIT

 Yacov Kaufman                        45          Vice President and Chief Financial Officer; and Vice President
                                                  and Chief Financial Officer of dsIT

 Robert M. Chiste                     55          Chief Executive Officer and director of Comverge


</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 29, 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 30, 2003. Mr.
Yurman,  who  is  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.


                                       1
<PAGE>

         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.

         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 from 1992 to 2001 and as Chief Financial  Officer of
dsIT since 1990, having served as Controller of dsIT since 1986.

         ROBERT M. CHISTE  was  appointed Chief Executive  Officer  and  elected
director of Comverge in September  2001.  Mr.  Chiste served as Vice Chairman of
Comverge from September 2001 to April 2003. From 1999 to 2001, Mr. Chiste served
as Chairman and Chief Executive officer of FuelONE,  Inc., a technology oriented
fuel and lubricant  wholesale  distribution  company that he co-founded,  and as
Chairman of FuelQuest Inc., a related e-commerce enterprise.  In 1998 Mr. Chiste
co-founded  Tri-Active Inc., a network and systems management company. From 1997
to 1998, Mr. Chiste served as Executive Vice President at Philip  Services Corp.
and as President of their Industrial Services/Utilities Management Division. Mr.
Chiste is also a director of Pentacon, Inc.

         On January 21,  2003,  Dr.  Robert L. Kuhn  resigned  from our Board of
Directors.  Dr. Kuhn had served as a director since 1986 and as Vice Chairman of
the Board of  Directors  since  1994.  On April 28,  2003,  Dr.  Allen I. Schiff
resigned  from our Board of  Directors.  Dr. Schiff had served as one a director
since 1992 and was chairman of our Audit and Compensation  Committees.  On April
29, 2003, Dr. Susan M. Malley  resigned from our Board of Directors.  Dr. Malley
had  served  as a  director  since  1998  and  was a  member  of our  Audit  and
Compensation Committees.

         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 of the issuer.  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.

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 2002 all applicable  filing  requirements were complied with
by its executive officers and directors.

         Although  Mr.  Morgenstern  filed all of his Form 4's on a timely basis
during prior years, in 2002 Mr.  Morgenstern  failed to report on a timely basis
ten  purchase  transactions  in his Form 4's for  transactions  made by his wife
during  October 2002. The late reports for these ten  transactions  related to a
total of 9,800 shares.


                                       2
<PAGE>

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 of
our officers who received in excess of $100,000 in salary and bonus during 2002.

<TABLE>
<CAPTION>

                                            SUMMARY COMPENSATION TABLE

                                                                        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       2000      446,600      550,000            -                  -              193,900
Chief Executive Officer  2001      446,351      150,000            -                  -              187,721
                         2002      465,700(1)      -               -                  -              182,860(2)


Yacov Kaufman            2000      150,000      32,000             -                  -               27,400
Chief Financial Officer  2001      158,403      50,000             -                  -               48,400
                         2002      170,294         -               -                  -               37,899(3)

Shlomie Morgenstern      2000      160,000      100,000            -                  -                 -
Vice President           2001      193,500         -               -                 (4)                -
                         2002      204,345      15,000             -                  -                7,440(5)

Jacob Neuwirth           2000         -            -               -                  -                 -
Chief Executive Officer  2001         -            -               -                  -                 -
and President of dsIT    2002      174,512         -               -                  -               39,788(3)

Robert M. Chiste         2000         -            -               -                  -                 -
Chief Executive Officer  2001        (6)           -               -                  -                 -
of  Comverge, Inc.       2002      250,000         -               -                                 $32,359(7)

-------------
</TABLE>

(1)  Reflects a voluntary  10% reduction in base salary  commencing  August 2002
     and a catch up of contractual  cost of living  adjustments  for prior years
     that had not been taken in the amount of $21,200.

(2)  Consists of (i) $120,800 in  contributions  to a non-qualified  retirement
     fund,  (ii) $28,000 in life  insurance  premiums,  (iii)  $22,600 paid for
     accrued  vacation,  (iv) $3,000 in director's  fees and (v) $8,460 imputed
     value of automobile fringe benefits.

(3)  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 all
     Israeli executives.

(4)  In 2001, Mr. Shlomie Morgenstern was awarded options to purchase shares of
     Comverge  representing  0.5% of the outstanding  stock of Comverge,  at an
     aggregate exercise price of $35,340.  Mr. Shlomie  Morgenstern served as a
     director of Comverge from June 1999 until April 2003.


                                       3
<PAGE>

(5)  Consists  of  $3,000  in  director's  fees  and  $4,400  imputed  value  of
     automobile fringe benefits.

(6)  Mr. Chiste joined Comverge in September 2001.

(7)  Consists of rental and travel allowances.


         The following  tables  summarize (i) the options granted in 2002 to the
executive  officers  named in the Summary  Compensation  Table  above,  (ii) the
potential value of these options at the end of the option term assuming  certain
levels of appreciation of our common stock,  (iii) the number of shares acquired
by such named  executive  officers  upon the exercise of options in 2002 and the
value  realized  thereon,  and (iv) the number and value of all options  held by
such executive officers at the end of 2002
<TABLE>
<CAPTION>
                                                    OPTION/SAR GRANTS IN 2002

                                                                                Potential Realizable Value at Assumed
                                                                             Annual Rates of Stock Price Appreciation
                                    Individual Grants(1)                               for Option Terms(2)
                          ------------------------------------------     --------------------------------------------
<S>                              <C>             <C>                                           <C>
                              Number of
                              Securities
                              Underlying       % of Total
                               Options      Options Granted
                               Granted      to Employees in
                               -------        Fiscal Year       Base Price     Exercise or
     Name                        (#)              (%)           ($/Share)    Expiration Date     5% ($)       10% ($)
     ----                        ---              ---           ---------    ---------------     ------       -------

     Yacov Kaufman(3)           25,000            100%            $5.25          7/31/07         41,846       94,221

-------------
</TABLE>

(1)      We did not grant any stock appreciation rights (SARs) in 2002.

(2)      The dollar  amounts under these columns are the result of  calculations
         at the 5% and 10% compounded  annual  appreciation  rates prescribed by
         the SEC and,  therefore,  are not intended to forecast  possible future
         price appreciation, if any, of our common stock.

(3)      Represents  extension of expiring  options at their  original  exercise
         price.


                                       4
<PAGE>
<TABLE>
<CAPTION>

                                               AGGREGATED OPTION EXERCISES IN 2002
                                             AND FISCAL YEAR END STOCK OPTION VALUES


                            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>           <C>

George Morgenstern              -            -            380,583           116,667            -               -
Yacov Kaufman                   -            -            185,666           19,334             -               -
Robert Chiste                   -            -            50,000            25,000             -               -
Shlomie Morgenstern             -            -            60,833             9,167             -               -
-------------
</TABLE>

(1)  Based on the closing  price for our common  stock on  December  31, 2002 of
     $0.85 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.  Dr.  Schiff was paid $24,000 per annum for his service as Chairman of
both the Audit Committee and the Compensation Committee, and was paid a total of
$27,000 in 2002 in  connection  with his service on the Board of  Directors  and
Board  committees.  Dr.  Kuhn was paid  $39,580 in 2002 in  connection  with his
service on the Board and as our Vice  Chairman.  Dr.  Malley was paid a total of
$17,000 in 2002 in  connection  with her service on the Board of  Directors  and
Board  committees.  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 addition to the directors' fees described  above, at the last Annual
Meeting of Stockholders each member of the Board of Directors who was not one of
our employees and who met certain other  eligibility  criteria (Mr.  Kerbs,  Dr.
Malley and Dr.  Schiff) was  granted  options to  purchase  7,500  shares of our
common  stock at an exercise  price of $1.77 per share (the fair market value of
our common stock on such date).  These options were granted pursuant to our 1994
Stock Option Plan for Outside Directors described below.

         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
130,000 non-expired options have been granted to date.


                                       5
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The mandate of our  Compensation  Committee  of the Board of  Directors
encompasses  all matters related to  compensation,  including  determination  of
stock option and other  stock-based  compensation and review of employment terms
and compensation of executive officers.  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  persons served both as members of our Board of Directors
and as our officers or employees in 2002:  George  Morgenstern  (Chairman of the
Board,  President and Chief Executive  Officer),  Mr. Krause (Secretary) and Mr.
Shlomie Morgenstern (Vice President-Operations). Both Mr. Krause and Mr. Shlomie
Morgenstern  served as directors  until our annual  meeting on December 3, 2002.
Dr. Kuhn, who resigned as director on January 21, 2003,  also served as our Vice
Chairman of the Board.  During 2002, 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 2002 in  deliberations of
the Board of Directors concerning executive officer  compensation.  During 2002,
Mr. George  Morgenstern,  Dr. Malley and Mr. Krause engaged in transactions with
us in which they were 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 and was  amended in March 2002 to extend  through  December  31,
2003 (the "Employment Agreement").  The Employment Agreement provides for a base
salary  of  $420,000  per  annum  (currently  $470,000  due to  cost  of  living
adjustments), 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 Employment  Agreement,  Mr. Morgenstern may at any time
prior to December  31,  2003,  elect 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 of the seventh year  following the year in which
he first commences to serve as a consultant.  During the Consulting  Period, Mr.
Morgenstern  would  be  entitled  to  receive  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 would be 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).  However, if Mr. Morgenstern elects to
become a consultant  following a breach by the Company of its obligations  under
the  Employment  Agreement  or  following a change in control of the Company (as
defined in the  Employment  Agreement),  Mr.  Morgenstern  would be  entitled to
receive his full annual  salary  until  December  31, 2003,  and  thereafter  to
receive  an annual  consulting  fee as  described  above for the  balance of the
Consulting  Period.  We are obligated under the Employment  Agreement to fund at
the  beginning  of the  Consulting  Period all amounts to become  payable to Mr.
Morgenstern  for  consulting  services  and to fund upon his  death all  amounts
payable to his estate.  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 any of our subsidiaries.


                                       6
<PAGE>

         In addition to the compensation provided for Employment  Agreement,  in
January 2000, the Board approved a bonus of $150,000 if Mr. Morgenstern remained
employed  full-time  as  President  and Chief  Executive  Officer of the Company
through December 31, 2001, which bonus was paid in 2001, and a $150,000 bonus if
an equity  financing  of  Comverge  of at least $10  million  was  completed  by
December 31, 2000,  which bonus was not paid as no qualifying  equity  financing
was completed by the end of 2000.

         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 (i) an  increase  in Mr.  Kaufman's  salary to $200,000
retroactive to January 1, 2002. In August 2002, Mr. Kaufman agreed to reduce his
annual salary by 10% until such time as we achieve profitability.

         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.  As of December
31, 2002,  the unfunded  portion of our  severance  obligation  was $71,000.  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.

         In  addition  to  the  compensation   provided  for  by  Mr.  Kaufman's
employment  agreement,  in November 2001, the Board approved a $50,000 bonus and
the grant of  options  to  purchase  15,000  shares of our  common  stock to Mr.
Kaufman in connection  with his efforts with respect to the  acquisition  by our
Israeli  subsidiary,  dsIT, of Endan IT Solutions  Ltd. The payment of the bonus
and the grant of the options were both  contingent upon the closing of the Endan
acquisition, which occurred in December 2001.

         Robert Chiste serves as Chief Executive Officer of Comverge pursuant to
an  employment  agreement  that  commenced on September 1, 2001.  Under a voting
agreement entered into by us and other investors in Comverge,  Mr. Chiste serves
as a director of Comverge. Mr. Chiste's employment agreement provides for a base
salary of $250,000 per annum,  plus an annual bonus up to 75% of his base salary
contingent upon achieving  performance  objectives  established each year by the
Board of Directors of Comverge.  Mr. Chiste is also entitled to a one-time bonus
of $250,000 if Comverge has an initial public offering with gross proceeds of at
least $10  million or there is a change of control  in which  Comverge  receives
either $20  million in cash or $25 million in publicly  traded  securities.  Mr.
Chiste's employment agreement also provides for the reimbursement  through March
2003 of up to $3,500 per month to cover Mr.  Chiste's auto,  living and personal
travel expenses.

         In connection with the signing of his employment agreement,  Mr. Chiste
also  received  an  option  to  purchase   shares  of  Comverge   common  stock,
representing 6% of the  outstanding  Comverge shares (on a fully diluted basis),
at an exercise price of $1.20 per share. The exercise price was determined based
upon a valuation  of Comverge as of July 31, 2001,  performed by an  independent
appraiser.  Mr.  Chiste's  Comverge  option will be adjusted to protect  against
dilution from issuances of common stock until  Comverge's  paid in capital is at
least $15 million.  Under the agreement,  Mr. Chiste also received a grant under
our 1994 Stock Incentive Plan of a stock option to purchase 75,000 shares of our
common stock at an exercise price of $5.95. In addition to the options, pursuant
to his  employment  agreement,  Mr. Chiste entered into an agreement with us for
the purchase of 50,000 shares of our common stock at a price of $5.95 per share.
Mr.  Chiste paid for the common  stock by  assigning  and  endorsing  to us a 6%
subordinated note of Philip Services Corp. (NasdaqNM:  PSCD), due April 2010, in
the principal amount of $297,500. The subordinated note, which is assignable, is


                                       7
<PAGE>
due  April  2010;  pays  interest  semi-annually  (in  cash or by an  additional
promissory note); and is subject to repayment in four annual payments  beginning
in April 2006.

         Mr. Chiste will receive retirement payments from Comverge if, after his
60th birthday,  his employment  agreement is terminated without cause or because
of Mr. Chiste's death or disability.  Mr. Chiste will not receive any retirement
payment if his employment is terminated prior to his 60th birthday. Mr. Chiste's
retirement  payments  will be made over seven  years  commencing  on the date of
termination.  During the first four years, Mr. Chiste's retirement payments will
be equal to 50% of his base salary in effect at the time of his termination, and
during the last three years the retirement  payments will be equal to 25% of the
base salary.

         Mr. Chiste may in certain circumstances receive severance payments from
Comverge.  Under  his  employment  agreement,  if  Mr.  Chiste's  employment  is
terminated without cause, Comverge would have to pay Mr. Chiste one year of base
salary,  or if there has been an IPO for  Comverge,  three  years of base salary
plus up to 15% of any excess  parachute  payment,  plus, if such  termination is
before  December 31, 2002, his base salary through  December 31. Mr. Chiste will
not be entitled to any severance  payments under his employment  agreement if he
voluntarily terminates his employment agreement.

         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, plus an annual bonus of 10%, should dsIT's annual net profit exceed
the NIS  equivalent  of  $317,000  and a 20%  bonus  should  it  exceed  the NIS
equivalent of $633,000.  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.

         Under his employment  agreement,  Mr. Neuwirth is entitled to a loan of
up to $100,000 from dsIT. As of December 31, 2002 the loan, which is denominated
in linked NIS,  bears  interest  at 4% and has no fixed  maturity  date,  had an
outstanding balance was $48,000.


                                       8
<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
May  1,  2003  (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 executive officers named in
the  Summary  Compensation  Table  under  "Executive and Director Compensation,"
(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>                      <C>

George Morgenstern                                              664,637(3)                     8.1%
Howard Gutzmer                                                  676,291(4)                     8.7%
    5550 Oberlin Drive
    San Diego, CA  92121
Dimensional Fund Advisors Inc.                                  492,100(5)                     6.3%
    1299 Ocean Avenue
    Santa Monica, CA  90401
Laurus Master Fund, Ltd.                                        400,000(6)                     5.1%
    c/o Ironshore Corporate Services Ltd.
    P.O. Box 1234 G.T.
    Queensgate House
    South Church Street
    Grand Cayman, Cayman Islands
Avi Kerbs                                                           -                           -
Elihu Levine                                                     45,970(7)                      *
Shane Yurman                                                        -                           -
Shlomie Morgenstern                                              81,833(8)                     1.0%
Yacov Kaufman                                                   185,666(9)                     2.3%
Robert M. Chiste                                                150,000(10)                    1.9%
Jacob Neuwirth                                                    60,870                       *
All executive officers and directors of the
Company as a group (8 people)                                  1,188,976                      14.0%

-----------------
*   Less than 1%
(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 May 1, 2003.
(3)  Consists of (i) 261,854 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,  2002,  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.

</TABLE>

                                       9
<PAGE>
<TABLE>
<CAPTION>

(5)  As of  December  31,  2002,  based on  information  in  Amendment  No. 2 to
     Schedule 13G filed on February 11, 2003.
(6)  As of May 1, 2003,  based on information on Schedule 13D filed on April 22,
     2003 and additional information known to us. Laurus is also the holder of a
     (i) a promissory note due June 30, 2003 in the original principal amount of
     $2  million,  which is  convertible  into  shares of our common  stock at a
     conversion price of $3.20 per share and had a remaining  principal  balance
     of $600,000,  (ii)  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 (iii) 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 convert the  convertible
     note or exercise its warrants if such  conversion or 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  (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) 3,000 shares
     owned  by  Mr.  Levine's  wife  and (iv) 1,790 shares held in an IRA of Mr.
     Levine's  wife.
(8)  Consists of 21,000 shares and 60,833 currently  exercisable options held by
     Mr. Shlomie Morgenstern.
(9)  Consists of currently exercisable options held by Mr.  Kaufman.
(10) Consists  of 100,000  shares  and  50,000  currently exercisable options
     held by Mr. Chiste.

                      Equity Compensation Plan Information
                                                                                                 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)
                 --------------------------------------------------------------------------------------------------------
<S>                       <C>                         <C>                     <C>                          <C>
                 Equity compensation plans
                 approved by security
                 holders                            1,209,750                  $5.68                   2,031,325

                 Equity compensation plans
                 not approved by security
                 holders                             529,017                   $4.04                    888,900
                                            --------------------------                         --------------------------
                           TOTAL                    1,738,767                  $5.18                   2,920,225
                                            --------------------------                         --------------------------

</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, 2002,  529,017  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,  2002,  our Chief  Executive  Officer has granted a total of 37,000
options under the 1995 Plan.


                                       10
<PAGE>

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

         During 2002, we paid approximately $630,000 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 2002 in connection  with his
position as Vice President-Operations.

         In March 2001, we retained Malley  Associates  Capital  Management,  an
asset  management  firm that is controlled  by Susan L. Malley,  then one of our
directors, to provide discretionary asset management services to us with respect
to $2 million of our funds.  The agreement  provided for a management  fee of 1%
per annum of the amount under management. In September 2002, the arrangement was
terminated.  Malley  Associates no longer provides any asset management or other
services to us. The  aggregate  fees paid to Malley  Associates  from March 2001
through September 2002 were $25,407.  Dr. Malley resigned as a director on April
29, 2003.

         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. As of February 2002, the corporation gave us notice
of its intent to vacate the space in April 2002. During 2002 we received $35,000
of rent from this corporation.

         In January 2000, our Comverge  subsidiary 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.



                                       11
<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 May 5, 2003.


                                        DATA SYSTEMS & SOFTWARE INC.

                                        By: /s/ George Morgenstern
                                           -------------------------------------
                                           George Morgenstern,
                                           Chief Executive Officer and President



                                       12

<PAGE>