SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 17, 1995 ------------------------ Spectrum Information Technologies, Inc. -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-15596 75-1940923 -------------------------------------------------------------------------- (State of other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2700 Westchester Avenue, Purchase, New York 10577 -------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code (914) 251-1800 ------------------------ -------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets. On September 11, 1995, Spectrum Information Technologies, Inc. ("Spectrum") entered an agreement (the "Plan") to sell all of the capital stock of its wholly owned subsidiary Spectrum Global Services, Inc. ("Global") to The Lori Corporation and COMFORCE Corporation (collectively, "Purchaser") for $6 million, plus a closing adjustment related primarily to the allocation of salaries and benefits of certain Spectrum and Global employees. Other members of the purchasing group included ARTRA Group Incorporated, a corporation organized under the laws of the State of Pennsylvania, Peter R. Harvey, Marc L. Werner, James L. Paterek, Michael Ferrentino and Christopher P. Franco. The sale of Global was subject to bankruptcy court approval and receipt of higher and better offers. A hearing regarding the transaction (and any higher and better offers) was held on October 17, 1995 before the United States Bankruptcy Court for the Eastern District of New York, following which the court approved the sale. The Purchaser paid cash for Global's stock at the October 17th closing, the purchase price of which was based on a multiple of Global's earnings before interest and taxes for fiscal 1995 and accounted for Global's cash and accounts receivable. In July 1995, Mr. Paterek, president of Global, Mr. Ferrentino, a vice president of Global, and Mr. Franco, Spectrum's vice president and former general counsel, notified Spectrum that they wished to pursue an opportunity independent of Spectrum and intended to accept positions with the Purchaser if its bid for Global was successful. Following the sale, Mr. Ferrentino and Mr. Franco assumed senior management positions with the Purchaser, and the Purchaser announced that Mr. Paterek would become a consultant to COMFORCE Corporation. A copy of the Plan is attached as an exhibit hereto and is incorporated by reference herein. The foregoing summary of such document is qualified in its entirety by reference to the actual document. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (b) Pro Forma Financial Information. The following unaudited consolidated pro forma financial statements give effect to the October 17, 1995 sale of all of the capital stock of Spectrum Global Services, Inc. ("Global") to The Lori Corporation and COMFORCE Corporation (the "Transaction")(See Item 2 - Acquisition or Disposition of Assets). The unaudited pro forma balance sheet as of June 30, 1995 gives effect to the Transaction as if it occurred on June 30, 1995. The unaudited pro forma statements of income (loss) for the year ended March 31, 1995 and the three months ended June 30, 1995 represent the consolidated results of operations of Spectrum Information Technologies, Inc. ("Spectrum") assuming the Transaction occurred on April 1, 1994. These financial statements have been prepared utilizing the historical financial statements of Spectrum. This information should be read in conjunction with the audited financial statements and accompanying notes in Spectrum's annual report on Form 10-K for the fiscal year ended March 31, 1995 and the unaudited financial statements and accompanying notes in Spectrum's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 1995. The unaudited pro forma consolidated financial statements are provided for comparative purposes only and do not purport to be indicative of the financial position or results of operations that would have occurred and actually have been reported if the Transaction had been effected on the dates indicated or results which may be obtained in the future. Pro forma adjustments are described in the accompanying notes. SPECTRUM INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES (Debtors-in-Possession) PRO FORMA CONSOLIDATED BALANCE SHEETS (UNAUDITED) JUNE 30, 1995 Condensed Historical Pro forma Pro forma Assets Statements Adjustments Results - ------------------------------------------------------------------------------ (Amounts in thousands) Current assets: Cash and cash equivalents $ 2,725 $5,377(1) $8,102 Marketable securities 942 - 942 Accounts receivable, net 7,950 (1,692)(1) 6,258 Inventories 375 - 375 Prepaid expenses and other current assets 341 (13)(1) 328 ------- ------- ------- Total current assets 12,333 3,672 19,677 ------- ------- ------- Net property and equipment 1,191 (102)(1) 1,089 ------- ------- ------- Notes receivable-related parties 91 - 91 Other assets 450 - 450 Intangible assets, net 3,667 (2,191)(1) 1,476 - ----------------------------------------------------------------------------- Total assets $17,732 $1,379 $19,111 ======= ======= ======= SPECTRUM INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES (Debtors-in-Possession) PRO FORMA CONSOLIDATED BALANCE SHEETS (UNAUDITED) JUNE 30, 1995 Condensed Historical Pro forma Pro forma Liabilities and Stockholders' Equity Statements Adjustments Results - ----------------------------------------------------------------------------- (Amounts in thousands) Current liabilities: Accounts payable $ 484 (262)(1) $ 222 Accrued liabilities 1,835 (94)(1) 1,741 Other current liabilities 6,000 - 6,000 ------- ------- ------- Total current liabilities 8,319 (356) 7,963 ------- ------- ------- Deferred income 450 - 450 ------- ------- ------- Total liabilities subject to compromise 9,078 - 9,078 ------- ------- ------- Total liabilities 17,847 (356) 17,491 ------- ------- ------- Stockholders'equity: Common Stock, $.001 par value, 110,000 shares authorized; 76,675 issued as of June 30, 1995 and March 31, 1995 77 - 77 Paid-in capital 63,961 - 63,961 Accumulated deficit (63,802) 1,735 (62,067) ------- ------- ------- 236 1,735 1,971 Treasury stock, 100 shares at cost (300) - (300) Unrealized loss on marketable securities (51) - (51) ------- ------- ------- Total stockholders' equity (115) 1,735 1,620 ------- ------- ------- Total liabilities and stockholders' equity $17,732 $1,379 $19,111 ======= ======= ======= SPECTRUM INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES (Debtors-in-Possession) PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) Fiscal Year Ended March 31, 1995 -------------------------------- Condensed Historical Pro forma Pro forma Statements Adjustments Results - ----------------------------------------------------------------------------- (Amounts in thousands, except per share amounts) REVENUES: Merchandise sales, net $10,296 $9,003 $ 1,293 Licensing fees and royalties 1,331 - 1,331 ------- ------- ------- Total revenues 11,627 9,003 2,624 ------- ------- ------- OPERATING COSTS AND EXPENSES: Cost of revenues 7,227 6,705 522 Selling, general and administrative 13,342 1,387 11,955 ------- ------- ------- Total operating costs and expenses 20,569 8,092 12,477 ------- ------- ------- Operating Income (loss) (8,942) 911 (9,853) ------- ------- ------- Professional fees in connection with Chapter 11 filings (425) - (425) ------- ------- ------- OTHER INCOME (EXPENSE): Total other income (expense) (386) 9 (395) ------- ------- ------- Net Income (Loss) from continuing operations (9,753) 920 (10,673) ------- ------- ------- NET INCOME (LOSS) PER COMMON SHARE: Income (Loss) from continuing operations $ (.13) $ .01 $ (.14) ======= ======= ======= SPECTRUM INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES (Debtors-in-Possession) PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) Three Months Ended June 30, 1995 ------------------------------ Condensed Historical Pro forma Pro forma Statements Adjustments Results - ----------------------------------------------------------------------------- (Amounts in thousands, except per share amounts) REVENUES: Merchandise sales, net $3,164 $2,963(2) $ 201 Licensing fees and royalties 829 - 829 ------- ------- ------- Total revenues 3,993 2,963 1,030 ------- ------- ------- OPERATING COSTS AND EXPENSES: Cost of revenues 2,331 2,208(2) 123 Selling, general and administrative 2,596 469(2) 2,127 ------- ------- ------- Total operating costs and expenses 4,927 2,677 2,250 ------- ------- ------- Operating loss (934) 286 (1,220) ------- ------- ------- Professional fees in connection with Chapter 11 filings (890) - (890) ------- ------- ------- OTHER INCOME (EXPENSE): Total other income (expense) (74) (15)(2) (59) ------- ------- ------- Loss from continuing operations (1,898) 271 (2,169) ------- ------- ------- NET INCOME (LOSS) PER COMMON SHARE: Loss from continuing operations $ (.02) $ (.03) ======= ======= Notes to the pro forma consolidated financial statements: (1) The gross and net proceeds of the Transaction are approximately $6,000,000 and $4,572,000, respectively. The pro forma consolidated balance sheet reflects the addition of net proceeds of $4,572,000 and the removal of the net assets (liabilities) of Global of $4,803,000. (2) The pro forma consolidated statements of loss reflect the removal of the operations of Global as though the Transaction had occurred on April 1, 1994. The gain reflected on the pro forma balance sheet is not incorporated in the pro forma consolidated statements of loss as it is a nonrecurring credit, and the related expenses in the amount of $325,000 are not reflected on the pro forma consolidated statements of loss as they are nonrecurring charges. The impact on selling, general and administrative expenses associated with the transfer of salaries and benefits of certain employees has not been reflected on the pro forma consolidated statements of loss as the expenses were not material. (c) Exhibits. Exhibit No. Description 2.1 The Plan (including the exhibits thereto). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SPECTRUM INFORMATION TECHNOLOGIES, INC. Dated: November 1, 1995 By: /s/ Barry J. Hintze ---------------------------- Name: Barry J. Hintze Title: Controller and Principal Accounting Officer Exhibit Index Exhibit No. Description 2.1 The Plan (including exhibits thereto).