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) February 28, 1997
Spectrum Information Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-15596 75-1940923
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
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)
<PAGE>
Item 5. Other Events
On February 28, 1997, Judge Frederick Block of the
United States District Court for the Eastern District of New York
approved the settlement of the securities related class action
that was originally commenced against Spectrum in 1993. As a
result, Spectrum expects the effective date of its confirmed plan
of reorganization, including the implementation of the class
action settlement, to occur on March 31, 1997.
Under the terms of the class action settlement,
Spectrum will issue to the class plaintiffs a number of shares of
Class A Preferred Stock equal to the number of shares of
Spectrum's common stock available under its confirmed plan of
reorganization to existing stockholders and the trustee for the
Company's discontinued Computer Bay subsidiary. In addition, the
class plaintiffs are to receive the proceeds, net of certain fees
and expenses, from $10 million of insurance polices covering
Spectrum's prior directors and officers and, as a result of court
supervised negotiations and at the recommendation of the Court,
approximately $1,350,000 (in cash or publicly traded securities)
from the various individual defendants in the action and $250,000
from Spectrum.
The insurance carriers representing $6 million out of
the $10 million of the insurance that may be available to the
class plaintiffs have disclaimed coverage. The insurance
carriers were unsuccessful in their attempt to disclaim coverage
following a bench trial before the U.S. District Court and have
appealed the adverse decision. The U.S. Court of Appeals for the
Second Circuit held oral argument on the appeal on February 18,
1997. The outcome of this appeal will have no financial impact
on Spectrum.
Spectrum's confirmed plan of reorganization will
provide all general unsecured creditors with 100 percent of the
value of their claims plus 6 percent annual interest on the
effective date of the plan. It also will settle the class action
litigation by the payment of $250,000 cash and the delivery of
approximately 45 percent of the equity ownership in the
reorganized company to a trustee to be distributed to the members
of the class. On the effective date, total cash distributions
for unsecured claims, administrative claims and priority claims
are expected to be approximately $4 million.
Although existing Spectrum stockholders will be
substantially diluted, under the terms of the plan current
shareholders should obtain the majority of the 45 percent equity
ownership in the reorganized company set aside for such
shareholders and certain creditors. This should hold true even
after the issuance of $300,000 worth of stock to the liquidating
trustee of Spectrum's former Computer Bay subsidiary in
connection with the settlement of the trustee's multi-million
dollar claim against Spectrum.
The confirmed plan of reorganization also calls for
Spectrum's management, employees and non-executive directors
participating in developing the plan of reorganization to receive
the remaining 10 percent equity ownership pursuant to an
incentive stock plan.
Spectrum currently has 76,675,448 shares of common
stock issued and outstanding. On the effective date, issued and
outstanding shares of common stock will be canceled and replaced
with one (1) new share of reorganized common stock for each
seventy-five (75) shares of existing common stock resulting in
approximately 1 million shares of common stock issued to existing
shareholders. Fractional shares will be rounded up or down
accordingly. An equal number of approximately one million new
shares of Class A Preferred Stock will be delivered to a trustee
to be distributed to plaintiffs in the class action.
Additionally, approximately 227,000 new shares of reorganized
common stock will be issued pursuant to the incentive stock plan.
Spectrum stock is currently traded in the NASD OTC Bulletin
Board.
This Current Report on Form 8-K contains statements
that are "forward-looking," including those concerning the
effective date of Spectrum's plan of reorganization. Delaying
the effective date of Spectrum's plan of reorganization may have
an adverse effect on the Company. Spectrum's quarterly and
annual reports as filed with the Securities and Exchange
Commission discuss this and other risk factors.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized.
Dated: March 4, 1997
SPECTRUM INFORMATION TECHNOLOGIES, INC.
By /s/ Donald J. Amoruso
--------------------------------------
Donald J. Amoruso
President, Chief Executive Officer and
Chairman of the Board of Directors
By /s/ Barry J. Hintze
--------------------------------------
Barry J. Hintze
Controller and
Principal Accounting Officer
