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, 2001

                         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 12, 2002 was approximately $25.5 million.  The aggregate
market value was calculated by using the closing price of the stock on that date
on the Nasdaq National Market.

     Number of shares outstanding of the registrant's  common stock, as of March
12, 2002: 7,353,163.

                      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

                                                                            PAGE

PART III

Item 10   Directors and Executive Officers of the Registrant.................  1

Item 11   Executive Compensation.............................................  4

Item 12   Security Ownership of Certain Beneficial Owners and
          Management......................................................... 10

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

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

<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  the  directors and the
executive officers and key managers of the Company:

Name                   Age  Position

George Morgenstern     68   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 Chairman of the
                            Board of our Comverge Technologies, Inc. subsidiary
                            ("Comverge")

Robert L. Kuhn         57   Director and Vice Chairman of the Board

Sheldon Krause         46   Director and Secretary; and Director and Assistant
                            Secretary of Comverge

Susan L. Malley        53   Director

Maxwell M. Rabb        91   Director

Allen I. Schiff        56   Director

Shlomie Morgenstern    39   Director and Vice President--Operations; and
                            Director of Comverge

Howard Gutzmer         70   Director

Jacob Neuwirth (Noy)   55   Chief Executive Officer and President of DSIT

Yacov Kaufman          44   Vice President and Chief Financial Officer; and Vice
                            President and Chief Financial Officer of DSIT

Robert M. Chiste       54   Chief Executive Officer and Vice Chairman of the
                            Board of Comverge

Frank Magnotti         41   President and Director of Comverge

Joseph D. Esteves      41   Executive Vice President of Comverge

     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
Chairman of the Board of Comverge.

     ROBERT L. KUHN has been a  director  since  1986 and Vice  Chairman  of the
Board since 1994.  Since 1991, Dr. Kuhn has been  President of Geneva  Financial
Corporation, a company specializing in mergers and acquisitions.

                                       1
<PAGE>


     SHELDON  KRAUSE has served as Secretary  since 1986 and as a director since
1994.  Since 1987, Mr. Krause has been engaged in the private practice of law in
New York City and is  currently a member of the firm of  Ehrenreich  Eilenberg &
Krause LLP. From 1981 to 1986, Mr. Krause was  associated  with the New York law
firm of  Cravath,  Swaine  & Moore.  Mr.  Krause  is the  son-in-law  of  George
Morgenstern, our Chairman of the Board, President and Chief Executive Officer.

     SUSAN L. MALLEY has been a director since March 1998. Dr. Malley has served
since  1995 as  President  and Chief  Investment  Officer  of Malley  Associates
Capital Management, an asset management firm which Dr. Malley founded. From 1995
to January  2001,  Dr.  Malley was also a  Professor  of Finance at the  Hofstra
University School of Business.  From 1990 until 1995, Dr. Malley was Co-Chair of
the Board of  Directors  and Chief  Investment  Officer of  Citicorp  Investment
Services, a retail brokerage subsidiary of Citibank, N.A.

     HON.  MAXWELL M. RABB has been a director since 1992.  Ambassador  Rabb has
been Of Counsel to the law firm of Kramer,  Levin, Naftalis & Frankel since 1991
and was Of  Counsel  to the law firm of  Stroock & Stroock & Lavan  from 1989 to
1991. From 1981 to 1988, Ambassador Rabb was United States Ambassador to Italy.

     ALLEN I. SCHIFF has been a director since 1992.  Since 1978, Dr. Schiff has
been a Professor of Accounting at Fordham University Graduate School of Business
Administration,  serving as Chairman of the Accounting  Department  from 1981 to
1983 and from 1985 to 1990.

     SHLOMIE MORGENSTERN has been Vice President-Operations  since February 2000
and a director since November 2001. Mr.  Morgenstern also serves as President of
our  Databit  subsidiary  and  as  a  director  of  Comverge.  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.

     HOWARD GUTZMER has been a director since July 2001. Since 1990, Mr. Gutzmer
has  been  the  Chairman,  Chief  Executive  Officer,   President  and  majority
shareholder of Unlimited Systems Corp., which manufactures hardware and develops
software for computer-telephone interfaces.

     JACOB NEUWIRTH (NOY) 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.

     YACOV  KAUFMAN has been Vice  President and 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.  Mr.  Kaufman  also  served as Chief  Financial
Officer of Comverge from October 1997 to October 2001.

     ROBERT M. CHISTE was appointed Chief Executive Officer and Vice Chairman of
the Board of Comverge in September 2001. 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  with Philip  Services
Corp.  and  as  President  of  their  Industrial  Services/Utilities  Management
Division. Mr. Chiste is also a director of Pentacon, Inc.

     FRANK  MAGNOTTI  has been the  President  and a director of Comverge  since
October  1997.  From 1993 to 1997,  Mr.  Magnotti  was the  founder  and General
Manager of the Utility Solutions Division of Lucent Technologies, Inc.

                                       2
<PAGE>


     JOSEPH D. ESTEVES has been the Executive  Vice  President of Comverge since
March 2001.  From 1995 to March 2001,  Mr.  Esteves  served as an officer of UBS
Warburg and its predecessor Union Bank of Switzerland,  most recently serving as
Executive  Director of Global Power & Pipelines.  From 1991 to 1995, Mr. Esteves
served as a Vice  President  of Goldman,  Sachs & Co.,  and from 1986 to 1991 he
served as a Vice President of Salomon Brothers.


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 Securities and Exchange Commission ("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 2001 all applicable  filing  requirements
were complied with by our executive officers and directors.

     Although  Mr.  Gutzmer  filed all of his Form 4's on a timely  basis during
2001, Mr. Gutzmer failed to report 12 purchase  transactions in his Form 4's for
the months of August,  September and October 2001.  These  transactions,  for an
aggregate of 14,500 shares of our common stock,  were reported in Mr.  Gutzmer's
Form 5, which was filed on a timely basis in February 2002.

                                       3
<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 2001.
Mr.  Chiste,  the Chief  Executive  Officer of  Comverge,  joined the Company in
September 2001. His annual salary is $250,000.

<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       1999      434,700         --              --                (1)             195,300
Chief Executive Officer  2000      446,600    550,000              --                --              193,900
                         2001      460,341    150,000              --                --              187,721(2)

Yacov Kaufman            1999      127,200         --              --                (1)              22,000
Chief Financial Officer  2000      150,000     32,000              --                --               27,400
                         2001      158,403     50,000              --                --               48,400(3)

Shlomie Morgenstern      1999      131,400         --              --                --                   --
Vice President           1000      160,000    100,000              --                --                   --
                         2001      193,500         --              --                (1)                  --

Frank Magnotti           1999      158,000         --              --                --                   --
President, Comverge      2000      175,400         --              --                --                   --
Technologies, Inc.       2001      185,640         --              --                --                   --
</TABLE>

-------------
(1)  In 1999, each of Mr. George Morgenstern and Mr. Kaufman was awarded options
     to purchase  shares which after the  combination of the Company's  Comverge
     and Powercom  subsidiaries  represented  0.5% of the  outstanding  stock of
     Comverge,  each at an aggregate  exercise price of $9,925.  Mr. Morgenstern
     has served as Chairman of Comverge since October 1997, and Mr. Kaufman also
     served as CFO of Comverge  from October 1997 until  October  2001. 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 has served as a director
     of Comverge since June 1999.

(2)  Consists of (i) $115,101 in  contributions  to a  non-qualified  retirement
     fund,  (ii)  $16,780 in life  insurance  premiums,  (iii)  $42,940 paid for
     accrued  vacation,  (iv)  $4,000 in  director's  fees and (v)  $8,900  with
     respect to the imputed value of automobile fringe benefits.


(3)  Represents  primarily  contributions to severance and pension funds.  These
     contributions  are made on  substantially  the same  basis as those made on
     behalf of all Israeli employees.

                                       4
<PAGE>

     The  following  tables  summarize  (i) the  options  granted in 2001 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 2001 and the
value  realized  thereon,  and (iv) the number and value of all options  held by
such executive officers at the end of 2001.

                                                    OPTION/SAR GRANTS IN 2001

<TABLE>
<CAPTION>
                                                                                       Potential Realizable Value at Assumed Annual
                                                                                            Rates of Stock Price Appreciation
                                                  Individual Grants(1)                                for Option Terms(2)
                              ----------------------------------------------------    --------------------------------------------
                                                        % of Total
                               Number of                 Options
                              Securities                Granted to
                              Underlying               Employees in                    Exercise or
                                Options                Fiscal Year      Base Price     Expiration
Name                          Granted (#)                   (%)         ($/Share)         Date           5% ($)         10% ($)
----                          -----------                   ---         ---------         ----           ------         -------
<S>                            <C>                         <C>            <C>           <C>             <C>             <C>
Yacov Kaufman                   40,000                      9%            $4.80         12/31/06         61,725         139,121
George Morgenstern              50,000                     12%            $4.80         12/31/06         76,518         172,291
Shlomie Morgenstern             27,500                      7%            $4.80         12/31/06         42,659          96,209
Yacov Kaufman                   15,000                      4%            $5.44         12/31/06         22,762          50,365
Robert Chiste                   75,000                     18%            $5.95         12/31/06        132,783         296,396
George Morgenstern             150,000(3)                  35%            $6.00          3/31/06        248,653         549,459
</TABLE>

-------------
(1)  The Company did not grant any stock appreciation rights (SARs) in 2001.

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

(3)  These  options  represent  extensions  of options  previously  granted  and
     scheduled to expire on March 31, 2001.  Such  options were  extended  under
     their original terms.

                                       5
<PAGE>


                       AGGREGATED OPTION EXERCISES IN 2001
                     AND FISCAL YEAR END STOCK OPTION VALUES

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

<S>                             <C>          <C>          <C>               <C>              <C>              <C>
George Morgenstern              --           --           213,916           283,334              817           1,633
Yacov Kaufman                   --           --           164,334            40,666          235,798           1,307
Robert Chiste                   --           --            25,000            50,000               --              --
Shlomie Morgenstern             --           --            45,000            25,000           48,823          15,307
</TABLE>

-------------
(1)  Based on the closing  price for our common stock on December  31, 2001,  of
     $4.849.

COMPENSATION OF DIRECTORS

     Each of our directors is generally  paid $1,000 for each Board and $500 for
each  committee  meeting  which such  director  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 is paid $24,000 per annum for his
service as Chairman of the Audit  Committee  and  Compensation  Committee,  plus
additional amounts in the event of special committee assignments, and was paid a
total  of  $28,000  in 2001 in  connection  with  his  service  on the  Board of
Directors and Board committees.  Dr. Kuhn was paid an additional $50,000 in 2001
in connection  with his service as Vice Chairman of the Company.  Dr. Malley was
paid a total of $17,500 in 2001 in  connection  with her service on the Board of
Directors and Board committees. Mr. Eisenberger,  who resigned from the Board in
November 2001, was paid a total of $7,500 in 2001 in connection with his service
on the Board of Directors.

     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  (Mr.  Krause,  Ambassador  Rabb,  Dr. Malley and Dr.  Schiff) was
granted  options to  purchase  7,500  shares of our common  stock at an exercise
price of $6.89 per share  (the fair  market  value of our  common  stock on such
date).  On July 31, 2001,  Mr.  Gutzmer was granted an option to purchase  7,500
shares at an exercise  price of $5.95 (the fair market value of our common stock
on such date) in connection with his appointment a director  earlier that month.
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
employees  of 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 eligible director is granted an option to
purchase 7,500 shares of common stock and (ii) immediately following each Annual
Meeting of  Stockholders,  each eligible  director will  generally be granted an
option to purchase 7,500 shares of 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 and (ii) one year from the date on which an optionee ceases to
be a director.  The maximum number of shares of common stock in respect of which
awards may be granted under the plan is 400,000,  of which  227,500  non-expired
options have been granted to date.

                                       6
<PAGE>


     In  addition  to serving as a director  until his  resignation  in November
2001, Mr. Eisenberger also serves as an employee of our Comverge  subsidiary and
was paid $110,294 during 2001 in connection with such employment.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The  mandate  of the  Compensation  Committee  of our  Board  of  Directors
encompasses  all matters related to  compensation,  including  determination  of
stock  option and other  stock-based  compensation  and review and  approval  of
employment terms and compensation of executive officers. Certain matters related
to the  compensation of the Chief  Executive  Officer are also considered by the
full Board of Directors.

     The following  persons served both as members of the Board of Directors and
as one of our officers or employees in 2001: George Morgenstern (Chairman of the
Board,  President and Chief Executive  Officer),  Dr. Kuhn (Vice Chairman of the
Board),  Mr.  Krause  (Secretary)  and Mr.  Eisenberger,  who is employed by the
Company's  Comverge  subsidiary  and resigned  from the Board in November  2001.
During  2001,  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 2001 in  deliberations  of the  Board  of
Directors concerning executive officer compensation. During 2001, 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  $446,500  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 us of our  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, 2002, 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

                                       7
<PAGE>


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.

     In addition to the  compensation  provided  for  Employment  Agreement,  in
January 2000, the Board approved, among other things, a bonus of $150,000 if Mr.
Morgenstern  remained  employed  full-time as our President and Chief  Executive
Officer through December 31, 2001.

     Yacov Kaufman serves as our Vice President and Chief Financial  Officer and
also holds such positions for DSIT pursuant to an employment  agreement  entered
into with us on January 1, 1999.  Although  the  employment  agreement  with Mr.
Kaufman  expired by its terms on  December  31,  2000 and has not been  formally
renewed,  we continue to employ Mr. Kaufman,  and Mr. Kaufman continues to serve
as our and DSIT's Vice President and Chief  Financial  Officer,  pursuant to the
terms of such employment agreement.

     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 to
Mr.  Kaufman of options to  purchase  15,000  shares of our common  stock (at an
exercise  price  equal  to the  fair  market  value  on the  date of  grant)  in
connection with his efforts in 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
on December 13, 2001.

     Mr. Kaufman also has severance  arrangements under his employment agreement
under certain circumstances. If Mr. Kaufman's employment agreement is terminated
by us or by him for reasons other than for cause,  we must pay him (i) 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, plus (ii) an amount
equal to five  times his last  month's  salary or two times  such  salary if Mr.
Kaufman terminates his employment agreement other than after a change in control
or a breach by us of his employment agreement. Our severance obligation 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, 2001,
the unfunded portion of such severance obligation was $64,000.

     Robert  Chiste  serves as Vice  Chairman  of the Board and Chief  Executive
Officer of Comverge  pursuant  to an  employment  agreement  that  commenced  on
September 1, 2001. 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 upon
Mr. Chiste's achieving performance objectives established each year by the Board
of Directors of Comverge.  Under his  employment  agreement,  Mr. Chiste is also
entitled to a one-time bonus of $250,000 if Comverge completes 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,  until  September 1, 2002, of up to $3,500 per month for Mr.
Chiste's auto, living and personal travel expenses.

     In  connection  with the signing of his  employment  agreement,  Mr. Chiste
received an option to purchase 6% of the  outstanding  shares of Comverge common
stock (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 for issuances of common stock until Comverge's paid in capital is at
least $15 million.  Mr. Chiste also received a stock option under our 1994 Stock
Incentive  Plan 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  purchased  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, due April 15, 2010, in the principal amount of $297,500 of
Philip Services Corp.  (NasdaqNM:  PSCD). The subordinated note is due April 15,
2010; is assignable;  pays interest
                                       8
<PAGE>


semi-annually;  and is subject to a sinking fund for the mandatory redemption of
the subordinated  note by no more than four annual payments,  beginning in April
15, 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.

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

                                       9
<PAGE>


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table and the notes  thereto set forth  information,  as of
April 22, 2002 (except as otherwise  set forth  herein),  concerning  beneficial
ownership (as defined in Rule 13d-3 under the  Securities  Exchange Act of 1934)
of Common Stock by (i) each director of the Company,  (ii) each of the executive
officers of the Company named in the Summary Compensation Table under "Executive
and Director  Compensation,"  (iii) all executive  officers and directors of the
Company  as a  group  and  (iv)  each  holder  of 5% or  more  of the  Company's
outstanding shares of Common Stock.

                                        Number of Shares of        Percentage of
Name and Address of                        Common Stock            Common Stock
Beneficial Owner(1)(2)                 Beneficially Owned(2)      Outstanding(2)
----------------------                 ---------------------      --------------
George Morgenstern                           758,104(3)                 9.7%
Howard Gutzmer                               774,105(4)                10.5%
5550 Oberlin Drive
San Diego, CA 92121
Dimensional Fund Advisors Inc.               523,000(5)                 7.1%
1299 Ocean Avenue
Santa Monica, CA90401
Robert L. Kuhn                               297,526(6)                 4.0%
Sheldon Krause                                58,500(7)                   *
Susan L. Malley                               23,200(8)                   *
Hon. Maxwell M. Rabb                          51,500(9)                   *
Allen I. Schiff                               50,200(10)                  *
Shlomie Morgenstern                           45,000(11)                  *
Yacov Kaufman                                164,334(11)                2.2%
Robert M. Chiste                              75,000(12)                1.0
Frank Magnotti                                    --                     --
All executive officers and directors
of the Company as a group
(11 people)                                2,297,469                   27.4%
* 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 April 22, 2002.

(3)  Consists of (i) 260,854 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,  and (ii)  497,250  currently  exercisable
     options held by Mr. Morgenstern.

(4)  As of December  April 22, 2002,  based on information in Amendment No. 1 to
     Schedule 13G filed on December 21, 2001, and Form 4's filed by Mr. Gutzmer.
     Consists of 225,914 shares owned by Mr. Gutzmer  (including  shares held in
     his IRA);  426,015 shares owned by the Gutzmer  Family Trust,  of which Mr.
     Gutzmer is a co-trustee;  48,950  shares held in an IRA of Dorene  Gutzmer,
     Mr.  Gutzmer's  wife;  50,126 shares owned by Unlimited  Systems Corp.,  of
     which  Mr.  Gutzmer  is  an  executive  officer,   director  and  principal
     shareholder;  and  23,100  shares  owned by  Gutzmer  Enterprises  Ltd.,  a
     California  limited  partnership,  the  general  partner  of  which  is KNX
     Management Inc., a California corporation, of which Mr. Gutzmer is the sole
     shareholder, officer and director.


                                       10
<PAGE>

(5)  As of  December  31,  2001,  based on  information  in  Amendment  No. 1 to
     Schedule 13G filed on February 12, 2002.

(6)  Consists of 192,656 shares and 105,000 currently  exercisable  options held
     by Dr. Kuhn.

(7)  Consists of 1,000 shares and 57,500 currently  exercisable  options held by
     Mr. Krause.

(8)  Consists of 700 shares and 22,500 currently exercisable options held by Dr.
     Malley.

(9)  Consists of 1,500 shares and 50,000 currently  exercisable  options held by
     Ambassador Rabb.

(10) Consists of 200 shares and 50,000 currently exercisable options held by Dr.
     Schiff.

(11) Consists of currently exercisable options.

(12) Consists of 50,000 shares and 25,000 currently  exercisable options held by
     Mr. Chiste.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During 2001, we paid approximately $530,000 for legal services rendered and
reimbursement of out-of-pocket  expenses to Ehrenreich Eilenberg & Krause LLP, a
law firm in which Sheldon Krause,  one of our directors 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 2001 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, one of our directors,  to
provide discretionary asset management services to us with respect to $2 million
of our funds.  Investments  may include  fixed income  government  and corporate
securities,  money market mutual funds,  short-term money market instruments and
equity  securities.  Malley Associates has complete  discretion and authority to
invest  our  funds  in  these  accounts  without  prior  consultation  with  us.
Investments to date have been limited to debt  securities and commercial  paper.
The agreement  provides for a management fee of 1% per annum of the amount under
management. Through December 31, 2001, we have paid fees to Malley Associates of
approximately $13,400.

                                       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 April 29, 2002.


                                 DATA SYSTEMS & SOFTWARE INC.

                                 By: /s/ Sheldon Krause
                                     -------------------------------------------
                                 Sheldon Krause, Secretary