UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                
                     WASHINGTON, D.C. 20549
                                
                           FORM 10-Q
                                

(Mark One)

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 
     For the quarterly period ended December 31, 1998

                               OR

( )  TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15 (d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 
     For the  transition  period from  _______________  to _______________


                         Commission File Number 0-15596
                                
                                
                                
                     SPECTRUM INFORMATION TECHNOLOGIES, INC.
                                
                                
             (Exact name of registrant as specified in its charter)
                                
                                       
                                       
Delaware                                       75-1940923      
(State of incorporation)                       (IRS Employer Identification No.)
                                       
P.O. Box 1006, New York, New York              10268
(Address of principal executive offices)       (Zip Code)
                                       

                                 (914) 251-1800


              (Registrant's telephone number, including area code)

                                
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  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. 
YES _X_ NO ____

As of January 19, 1999, the registrant had outstanding  7,048,698  shares of its
Common Stock, par value $.001 per share.



<PAGE>
                                  
                                  
            SPECTRUM INFORMATION TECHNOLOGIES, INC. AND SUBSIDIARIES
                                    FORM 10-Q
                                DECEMBER 31, 1998
                                  
                                      INDEX
                                  
                                  
                                  
                                  
                                  
  
PART I.  FINANCIAL INFORMATION                                          Page No.
  
Consolidated Balance Sheets                                                 1
  
Consolidated Statements of Income (Loss)                                    3
  
Consolidated Statements of Cash Flows                                       4
  
Notes to Consolidated Financial Statements                                  5
  
Management's Discussion and Analysis of Financial Condition
and Results of Operations                                                   8
  
  
  
PART II.  OTHER INFORMATION                                                15
  


<PAGE>


Spectrum Information Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets
(Amounts in thousands)



Assets                                            December 31,        March 31,
                                                      1998              1998
-------------------------------------------------------------------------------
                                                  (Unaudited)
Current assets:
  Cash and cash equivalents                       $   1,060           $   1,600
  Marketable securities                                   -                 449
  Refunds receivable                                     24                   -
  Accounts receivable (net of allowance 
   for doubtful Accounts of $0 at 
   December 31, 1998 and $6 at March 31, 1998)            -                 194

Employee Loans                                            -                  79
Prepaid expenses and other current assets                 8                 192
                                                  ----------          ---------
          Total current assets                        1,092               2,514
                                                  ----------          ---------

Property and equipment, at cost:

  Furniture, fixtures and equipment                     301                 598
  Less - accumulated depreciation                      (162)               (340)
  Less - allowance for impairment of idle 
   equipment                                           (139)                  -
                                                  ----------          ---------
          Net property and equipment                      -                 258
                                                  ----------          ---------

          Total assets                            $   1,092           $   2,772
                                                  ----------          ---------

See accompanying notes to consolidated financial statements.


                                       1
<PAGE>

Spectrum Information Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets
(Amounts in thousands, except share amounts)


                                                  December 31,        March 31,
Liabilities and Stockholders' Equity                 1998               1998
-------------------------------------------------------------------------------
                                                  (Unaudited)
Current Liabilities
 Accounts payable                                 $      64           $    227
 Accrued liabilities                                     55                453
 Reserve for litigation                                   -                645
 Deferred royalty income                                  -                153
 Reserve for unpaid Chapter 11 claims                     -                 25
                                                  ----------          ---------
     Total current liabilities                          119              1,503

Reserve for Chapter 11 and other stock claims             -                591
                                                  ----------          ---------
     Total liabilities                                  119              2,094
                                                  ----------          ---------

Stockholders' Equity:
 Class A Convertible Preferred Stock, $.001 
 par value, 1,500,000 shares authorized and 
 800,283 shares outstanding, converts to 
 common 3/31/99 on a share for share basis                1                  1

Common stock, $.001 par value, 10,000,000 
 shares authorized and 7,048,698 and 
 1,557,000 issued and outstanding, 
 respectively                                             7                  2
Paid-in capital                                      73,366             71,740
Accumulated deficit                                 (72,017)           (70,758)
                                                  ----------          ---------
                                                      1,357                985
Treasury stock, at cost, (61,805 shares 
 acquired from 1994 through 1998)                      (384)              (304)
Accumulated comprehensive loss                            -                 (3)
                                                  ----------          ---------
     Total stockholders' equity                         973                678
                                                  ----------          ---------
     Total liabilities and stockholders' equity   $   1,092           $  2,772
                                                  ----------          ---------
               

See accompanying notes to consolidated financial statements.


                                       2
<PAGE>


<TABLE>
<CAPTION>

Spectrum Information Technologies, Inc. and Subsidiaries

Consolidated Statements of Loss (Unaudited)
(Amounts in thousands, except per share amounts)        Three months ended           Nine months ended
                                                           December 31,                 December 31,
<S>                                                    <C>            <C>            <C>            <C>
                                                          1998           1997           1998           1997
-------------------------------------------------      ------------   -----------    ------------   -----------
Revenues:
  Licensing revenue                                    $       209    $       38     $     2,316    $    1,350
  Merchandise sales, net                                         -            30               8           131
                                                       ------------   -----------    ------------   -----------
     Total revenues                                            209            68           2,324         1,481
                                                       ------------   -----------    ------------   -----------
Operating costs and expenses:
  Cost of revenues                                               -             8               -            52
  Selling, general and administrative                        1,668         1,217           4,054         3,610
                                                       ------------   -----------    ------------   -----------
     Total operating costs and expenses                      1,668         1,225           4,054         3,662
                                                       ------------   -----------    ------------   -----------
Operating loss                                              (1,459)       (1,157)         (1,730)       (2,181)
                                                       ------------   -----------    ------------   -----------

Other income (expense), net                                    399            35             471           138
                                                       ------------   -----------    ------------   -----------
Net loss                                               $    (1,060)   $   (1,122)    $    (1,259)   $   (2,043)
                                                       ------------   -----------    ------------   -----------
Net loss per common share

Basic and diluted                                      $      (.50)   $     (.79)    $      (.65)   $    (1.62)

Weighted Average Number of
Common Shares used in income (loss)
per common share calculation:


Basic and diluted (See Note 1 (d))                       2,104,000     1,413,000       1,926,000     1,258,000


</TABLE>
Interim results are not indicative of the results expected for a full year. 
See accompanying notes to consolidated financial statements.



                                       3
<PAGE>

Spectrum Information Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(Amounts in thousands)

Nine months ended December 31,                       1998           1997
-----------------------------------------------------------------------------
                                                  (Unaudited)    (Unaudited)

Cash flow from operating activities:
 Net loss                                         $   (1,259)    $   (2,043)
 Adjustments to reconcile net loss to net cash 
  used by Operating activities:
  Loss (gain) on sale of marketable securities             3             (6)
  Loss on disposal of property and equipment              81              6
  Issuance of common stock                                 -             37
  Stock options granted to directors and 
   consultants                                            33              -
  Write-off of employee loans                             79              -
  (Gain) on litigation settlement                       (416)             -
  Provision for the impairment of idle equipment         139              -
  Depreciation and amortization                          109             95
  (Increase) decrease in:
   Refunds receivable                                    (24)           
   Accounts receivable                                   194            246
   Prepaid expenses and other assets                     184             40
  Increase (decrease) in:
   Accounts payable                                     (163)           120
   Accrued expenses                                     (398)          (441)
   Reserve for litigation                               (229)             -
   Deferred royalty income                              (153)             -
   Reserve for unpaid chapter 11 claims                  (25)             -
-----------------------------------------------------------------------------
    Net cash used by operating activities             (1,845)        (1,946)
-----------------------------------------------------------------------------

Cash flows from investing activities:
 Proceeds from sale of marketable securities             449          1,759
 Purchase of marketable securities                         -              -
 Loans to employees                                        -            (34)
 Proceeds from sale of property and equipment              3              3
 Capital expenditures                                    (74)          (114)
-----------------------------------------------------------------------------
    Net cash provided by investing activities            378          1,614
-----------------------------------------------------------------------------
Cash flow from financing activities:
 Purchase of treasury stock                              (80)            (3)
 Proceeds from the issuance of common stock              800              -
 Proceeds from the exercise of common stock options      207              -
-----------------------------------------------------------------------------
    Net cash provided (used) by financing activities     927             (3)
-----------------------------------------------------------------------------

Net decrease in cash and cash equivalents               (540)          (335)
Cash and cash equivalents, beginning of year           1,600          3,132
-----------------------------------------------------------------------------

Total cash and cash equivalents, end of year      $    1,060     $    2,797
                                                  ------------   ------------



See accompanying notes to consolidated financial statements.



                                       4
<PAGE>

Spectrum Information Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1.   Summary of Significant Accounting Policies

     (a)  Business
 
          On December  11,  1998,  Spectrum  Information  Technologies,  Inc., a
          Delaware  corporation (the  "Company"),  entered into a Stock Purchase
          Agreement  with Powers & Co.,  the  principal  of which is Lawrence M.
          Powers,  pursuant to which Powers & Co. purchased  3,000,000 shares of
          the   Company's   common   stock  par  value  $.001   (which   totaled
          approximately  54.9% of the  outstanding  aggregate  shares  of voting
          stock  of the  Company  at the  time)  and an  option  to  acquire  an
          additional  1,800,000  shares  of the  Company's  common  stock  at an
          exercise price of $0.15 per share, for an aggregate  purchase price of
          $600,000.  As a  result  of this  transaction  and  subsequent  equity
          investments  and option  exercises,  an aggregate of $1,007,000 of new
          equity was invested in the Company.  Additionally, as a result of this
          transaction,  all of the  Company's  senior  management  and  Board of
          Directors were replaced. The Company's new senior management and Board
          intend to change the direction  and nature of the Company's  business.
          The Company is now doing business as Siti-Sites.com  and is seeking to
          establish several web-sites for the marketing of products and services
          over the Internet.
 
          The   Company   is   planning   to  change  its   corporate   name  to
          Siti-Sites.com, Inc. but will retain its stock symbol "SITI". The name
          change is subject to shareholder approval and will be presented at the
          next meeting of the Company's shareholders,  scheduled within the next
          several months.  Shareholders owning  approximately  two-thirds of the
          issued and outstanding  shares of Common Stock have expressed approval
          of the name  change as being in the best  interest  of the Company and
          its shareholders.
 
          Historically,  the  Company  was  operating  as a holding  company  of
          several operating subsidiaries  generating revenues from royalties for
          licensing  its patents  relating to wireless  data  transmission  over
          cellular  networks.  From January 1995 through  December 11, 1998, the
          Company's  former  management  had to resolve the many  financial  and
          legal problems  inherited from prior years and to refocus the business
          direction of the Company.  One  strategy  was to seek  protection  and
          reorganization  under Chapter 11 of the  Bankruptcy  Code. The Company
          consummated a plan of  reorganization  and emerged from  bankruptcy on
          March 31, 1997.  Thereafter,  the Company spent substantial  monies to
          develop  and patent  new  software  and  related  products  for use in
          Internet  data  transmission.  In  particular,  the Company  developed
          FastLane , a software product which performs compression improving the
          speed of World Wide Web access for most dial-up subscribers.  However,
          financing  could not be found to  continue  with such  product and its
          marketing. In June 1998, the Company began seeking to raise capital or
          attract an  acquisition,  and by  December  1998 the Company had wound
          down its overhead  and  operations  and was on the verge of filing,  a
          second time, for bankruptcy protection.
 
          The  Company  does not  expect the former  businesses  to provide  any
          material  future  revenues.  The Company is trying to sell the patents
          and  technologies,  but does not anticipate  their sale, if it occurs,
          will  be a  significant  source  of  revenue.  In  substance,  the new
          investors  acquired control of a corporate shell with all of its known
          existing  obligations paid or provided for prior to closing,  enabling
          them to make a fresh start.
 
          Currently,  the  Company's  cash  assets are being  conserved  and new
          management  is in  preliminary  discussions  with  respect  to two new
          web-sites  which  it  currently  hopes to  finance  and  develop  with
          technical/marketing  partners.  No  assurance  can be given that these
          discussions will lead to the joint ventures planned, or that they will
          not  require  additional  financing  as they go  through  testing  and
          initial  marketing  phases.  Because  of the  emerging  nature  of its
          business,  management has closed the offices  previously rented by the
          Company and postponed the expense of obtaining  corporate office space
          until the new business  affiliations  have been  completed,  which may
          result in shared  space with  co-venturers.  Management  continues  to
          operate from its personal offices. The Company has placed into storage
          certain  computer  equipment  which it  hopes  to use for its  planned
          web-sites.  No  employees  have yet been put on  salary,  and  present
          management  has been working  without salary and may continue to do so
          for an undetermined  period of time. The primary expenses at this date
          are accounting and legal costs.


                                       5
<PAGE>

     (b)  Basis of Presentation

          The accompanying unaudited  consolidated  financial statements,  which
          include the accounts of the Company and its wholly owned subsidiaries,
          have been prepared in accordance  with generally  accepted  accounting
          principles for interim financial information and with the instructions
          to Form 10-Q. All significant  intercompany  transactions and accounts
          have been eliminated in  consolidation.  In the opinion of management,
          all adjustments considered necessary for a fair presentation have been
          included.
 
     (c)  Use of Estimates

          In  preparing  financial   statements  in  conformity  with  generally
          accepted  accounting  principles,   management  is  required  to  make
          estimates and assumptions  that affect the reported  amounts of assets
          and   liabilities   and  the  disclosure  of  contingent   assets  and
          liabilities  at the date of the financial  statements and revenues and
          expenses during the reporting period. Actual results could differ from
          those estimates.
  
     (d)  Loss Per Common Share

          The  computation  of  basic  loss  per  common  share  is based on the
          weighted  average number of common shares.  The computation of diluted
          income per common  share is based on the  weighted  average  number of
          common  shares and common  stock  equivalents  (convertible  preferred
          shares,  stock options and  warrants),  if  applicable,  assumed to be
          outstanding  during  the year.  Because  of the  substantial  sales of
          common stock and options in December 1998, the weighted average number
          of  2,104,000  shares of common stock is not fully  reflective  of the
          7,048,698 shares outstanding as of December 31, 1998.

     (e)  Licensing Agreements

          Licensing  income was  recognized  according to the specific  terms of
          each individual  contract.  On June 30, 1998, the Company entered into
          an agreement to license the Company's patented technology  (pre-dating
          its 1997  reorganization) to an entity for two non-recurring  up-front
          payments,  $425,000 in July 1998 and $925,000 in October 1998.  During
          September  1998, in order to continue as a going concern,  the Company
          amended this  agreement to receive  $900,000 in September 1998 instead
          of $925,000 in October 1998.  Also during  September 1998, the Company
          amended another  agreement to receive an up-front  payment of $610,000
          in October 1998,  instead of a guaranteed  $680,000 payable  quarterly
          through  February  2000.  Subsequently,  in October 1998,  the Company
          amended this  agreement to receive an up-front  payment of $185,000 in
          November  1998,  instead of royalty  payments  payable  quarterly from
          January 2000 through  December  2003. On December 18, 1998 the Company
          sold to Charles  Leedom,  a patent  attorney  with  Sixbey,  Friedman,
          Leedom  &  Ferguson,   the  Omnimodal  Patent  numbers  5,854,985  and
          5,761,621  for the price of $4,000  cash and $8,000 in  prepaid  legal
          services.  These  final  license  and  royalty  payments  are the last
          expected by  management on this  technology,  and the Company does not
          expect these patents to provide any material future revenues.

     (f)  Equipment

          On December 31, 1998  equipment  with a net book value of $139,229 was
          not in  service.  An  allowance  for the  impairment  of the value was
          established  for $139,229.  The equipment is being stored for possible
          future  use in its  proposed  Internet  businesses,  if and when  they
          develop.

     (g)  Recent Accounting Pronouncement

          In  June  1998,  the  Financial   Accounting  Standards  Board  issued
          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  133,
          "Accounting for Derivative  Instruments and Hedging  Activities." SFAS
          133  requires  companies  to recognize  all  derivatives  contracts as
          either assets or  liabilities in the balance sheet and to measure them
          at  fair  value.  Historically,  the  Company  has  not  entered  into



                                       6
<PAGE>

          derivatives   contracts   either  to  hedge   existing  risks  or  for
          speculative  purposes.   Accordingly,  the  Company  does  not  expect
          adoption  of the  new  standard  on  January  1,  2000 to  affect  its
          financial statements.

2.   Statements of Cash Flows

                                                        Nine months ended 
                                                            December 31,
                                                    ---------------------------
                                                       1998           1997
                                                    ---------------------------
                                                     (Amounts in thousands)

Supplemental disclosures of cash flow information:

 Cash paid during the year for interest                $      -       $      -
 Cash paid during the year for income taxes            $      1       $      2

Non-cash transactions:
Class A Convertible Preferred Stock issuance           $      -       $    300
 Payments of unsecured claims via common stock 
  issuance                                             $      -       $    162
 Stock issued to prior management and staff            $    591       $      -
 Stock options for prior board of directors & 
  consultants                                          $     33       $      -

3.   Earnings Per Share

     Earnings  per share for the three and nine months  ended  December 31, 1998
     and 1997 were calculated as follows:

                                           Three Months Ended December 31,
                                              1998                 1997
                                        Basic      Diluted   Basic      Diluted
                                                (Amounts in thousands)
        Net Income (loss)               $(1,060)   $(1,060)  $(1,122)  $(1,122)
                                        -------------------  ------------------

        Weighted average number of 
         common shares outstanding 
         during the year (i)              2,104      2,104     1,413     1,413

        Common stock equivalents - 
         preferred stock                      -          -         -         -
        Common stock equivalents - 
         stock options                        -          -         -         -
                                        -------------------  ------------------
        Weighted average number of 
         common shares and common 
         stock equivalents used in
         calculation of earnings per 
         common share (i)                 2,104      2,104     1,413     1,413
                                        -------------------  ------------------
        Earnings per common share (i)   $ (0.50)   $ (0.50)  $ (0.79)  $ (0.79)
                                        -------------------  ------------------

                                             Nine Months Ended December 31,
                                             1998                 1997
                                        Basic      Diluted   Basic      Diluted
                                                (Amounts in thousands)
        Net Income (loss)               $(1,259)   $(1,259)  $(2,043)  $(2,043)



                                       7
<PAGE>


        Weighted average number of 
         common shares outstanding 
         during the year (i)              1,926      1,926     1,258     1,258

        Common stock equivalents - 
         preferred stock                      -          -         -         -
        Common stock equivalents - 
         stock options                        -          -         -         -
                                        -------------------  ------------------
        Weighted average number of 
         common shares and common 
         stock equivalents used in
         calculation of earnings per 
         common share (i)                 1,926      1,926     1,258     1,258
                                        -------------------  ------------------
        Earnings per common share (i)   $ (0.65)   $ (0.65)  $ (1.62)  $ (1.62)
                                        -------------------  ------------------


Common  stock  equivalents  were not  included  in the  computation  of weighted
average shares outstanding for the three and nine months ended December 31, 1998
and 1997 because such inclusion would be anti-dilutive.

(i)  Because of the  substantial  sales of common  stock and options in December
1998,  the weighted  average  number of 2,104,000  shares of common stock is not
fully reflective of the 7,048,698 shares outstanding as of December 31, 1998.

 4.  Comprehensive Income (Loss)
 
     The Company adopted Statement of Financial Accounting Standard ("SFAS") No.
     130, "Reporting Comprehensive Income" which requires that all components of
     comprehensive  income and total comprehensive  income be reported on one of
     the following:  a statement of income and comprehensive income, a statement
     of   comprehensive   income  or  a  statement  of   stockholders'   equity.
     Comprehensive  income  is  comprised  of net  income  and  all  changes  to
     stockholders'  equity,  except those  resulting from  investments by owners
     (changes in paid in capital) and distributions to owners  (dividends).  For
     all periods  presented,  comprehensive  income is comprised  of  unrealized
     holding  losses on  marketable  securities.  Comprehensive  income  and its
     components consist of the following:

                                                        Nine months ended 
                                                            December 31,
                                                       1998           1997
                                                     (Amounts in thousands)
                                                     -------------------------
          Net Loss                                   $ (1,259)        $(2,043)
          Other Comprehensive income (loss), 
           net of tax                                       0              (3)
                                                     -------------------------
          Comprehensive income (loss)                $ (1,259)        $(2,046)


Spectrum Information Technologies, Inc. and Subsidiaries

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

     This entire report,  including discussions in the Notes to the Consolidated
Financial  Statements,  contains  forward-looking  statements  that are based on
current  expectations  about the Company's  business,  its business strategy and
management's  beliefs and assumptions.  Words such as "expects,"  "anticipates,"
"intends," "potential," "hopes," "plans," "believes" and similar expressions are
intended  to identify  forward  looking  statements.  These  statements  are not
guarantees  of  future  performance  and are  subject  to  significant  risk and
uncertainty and actual results may differ  materially from what is expressed.  A
discussion  of the risk factors  regarding the  implementation  of the Company's
business strategy is set forth herein. In addition,  particular attention should
be paid to the  cautionary  statements  in this report  involving  the Company's
ability  to  find  and   effectively   develop  the  web-site  and   partnership
opportunities  contemplated herein and the Company's ability to raise capital in
the near and long term. Additional  information regarding the Company's strategy
and associated  risks is included in the Company's Annual Report on Form 10-K as
filed with the Securities  and Exchange  Commission,  but is deemed  modified by
events in 1998 as  described  in this  report.  Except as required  by law,  the
Company  undertakes  no  obligation  to update  any  forward-looking  statement,
whether as a result of new information, future events or otherwise. Readers,



                                       8
<PAGE>

however,  should  carefully  review the  factors  set forth in other  reports or
documents  that the  Company  files  from time to time with the  Securities  and
Exchange Commission (the "SEC").


Business
   
     Spectrum   Information   Technologies,   Inc.,   a   Delaware   corporation
("Spectrum"),  and its  subsidiaries  (collectively,  the  "Company"),  plans to
establish  Internet  web-sites for the  marketing of products and services.  The
services could involve Internet projects and direct marketing  projects as well.
The Company  plans to develop  the sites  independently  and  through  strategic
alliances. Management believes the World Wide Web is becoming the marketplace of
choice for consumers all across the globe. While there are innumerable web-sites
now in  operation,  management  believes  that there are still  many  worthwhile
opportunities to pursue.  The industry is still in its infancy,  but many of the
early entrants are already being  consolidated  into larger units,  and some are
going out of business.
 
     Many  web-sites  attempt  to  make  themselves  appealing  to the  broadest
audience possible. The Company hopes that it can develop multiple sites targeted
to the interests of specific  demographic groups by entering into joint ventures
with specialists in such groups. In this way, the Company believes it can foster
multiple  communities of loyal  participants,  which,  in turn will lead to long
term marketing possibilities. Members of the Company's new senior management and
Board of  Directors,  in addition to having  general  management  experience  as
Chairman/CEO  (Powers) or Presidents  (Schonfeld  and Ingenito) of publicly held
and private  businesses,  have backgrounds in media/cable TV, direct  marketing,
computer    manufacturing    and    management    consulting    (Gerber),    and
finance/acquisitions.  Initially,  they have  invested an aggregate of more than
$900,000 of their  personal  funds to create a balance sheet platform from which
to build the Company.

     Currently, the Company's cash assets are being conserved and new management
is in  preliminary  discussions  with  respect  to two new  web-sites  which  it
currently  hopes to finance and develop with  technical/marketing  partners.  No
assurance can be given that these  discussions  will lead to the joint  ventures
planned,  or that they will not require additional  financing as they go through
testing and initial  marketing  phases.  Because of the  emerging  nature of its
business, management has closed the offices previously rented by the Company and
postponed the expense of obtaining corporate office space until the new business
affiliations  have been  completed,  which  may  result  in  shared  space  with
co-venturers.  Management  continues to operate from its personal  offices.  The
Company has placed into storage certain computer equipment which it hopes to use
for its planned web-sites. No employees have yet been put on salary, and present
management has been working without receiving any compensation (although present
management may receive  compensation for future time commitments if and when the
Company is able to pay it). The primary expenses at this date are accounting and
legal costs.

     The  Company's  ability to find and  effectively  develop the  web-site and
partnership   opportunities   contemplated  herein  and  its  ability  to  raise
additional  capital in the near and long term could  prevent  the  Company  from
implementing its business strategy.

     The  Company  is now doing  business  as  Siti-Sites.com.  The  Company  is
planning to change its corporate  name to  Siti-Sites.com,  Inc. but will retain
its stock symbol "SITI". The name change is subject to shareholder  approval and
will be presented at the next meeting of the  Company's  shareholders  scheduled
within the next several months.  Shareholders owning approximately two-thirds of
the issued and outstanding shares of Common Stock have expressed approval of the
name change as being in the best interest of the Company and its shareholders.

     On December 11, 1998, the Company  entered into a Stock Purchase  Agreement
with Powers & Co., the  principal  of which is Lawrence M.  Powers,  pursuant to
which Powers & Co. purchased  3,000,000 shares of the Company's common stock par
value $.001 (which  totaled  approximately  54.9% of the  outstanding  aggregate
shares of voting  stock of the  Company at the time) and an option to acquire an
additional  1,800,000  shares of the Company's common stock at an exercise price
of $0.15 per share, for an aggregate purchase price of $600,000.  As a result of
this  transaction and subsequent  equity  investments and option  exercises,  an
aggregate of $1,007,000 of new equity was invested in the Company. Additionally,
as a result of this transaction all of the Company's senior management and Board
of Directors were replaced. The new senior management and Board of Directors has
changed the focus of the Company to its current strategy described above.

     Historically,  the Company was  operating  as a holding  company of several
operating  subsidiaries  generating  revenues  from  royalties for licensing its
patents  relating to wireless data  transmission  over cellular  networks.  From
January 1995 through December 11, 1998, the Company's  former  management had to
resolve the many financial and legal problems  inherited from prior years and to


                                       9
<PAGE>

refocus  the  business  direction  of the  Company.  One  strategy  was to  seek
protection  and  reorganization  under Chapter 11 of the  Bankruptcy  Code.  The
Company  consummated  a plan of  reorganization  and emerged from  bankruptcy on
March 31, 1997. See "History of the Plan of Reorganization - 1995 through 1998."
Thereafter,  the  Company  spent  substantial  monies to develop  and patent new
software  and  related  products  for  use in  Internet  data  transmission.  In
particular,  the Company developed  FastLane , a software product which performs
compression  improving  the  speed of World  Wide Web  access  for most  dial-up
subscribers. However, financing could not be found to continue with such product
and its  marketing.  In June 1998, the Company began seeking to raise capital or
attract an  acquisition,  and by  December  1998 the  Company had wound down its
overhead  and  operations  and was on the verge of filing,  a second  time,  for
bankruptcy protection.

     The Company does not expect the former  businesses  to provide any material
future revenues. The Company is trying to sell the patents and technologies, but
does not anticipate  their sale, if it occurs,  will be a significant  source of
revenue.  In substance,  the new investors acquired control of a corporate shell
with  all of its  known  existing  obligations  paid or  provided  for  prior to
closing, enabling them to make a fresh start.

     Immediately preceding the change of control in December,  1998, the Company
had  approximately  1,668,698  shares of Common Stock issued and outstanding and
800,283 shares of  convertible  Class A Convertible  Preferred  Stock issued and
outstanding.  The Class A Stock automatically  converts to Common Stock on March
31,  1999.   Upon  completion  of  the   transaction,   Powers  &  Co.  acquired
approximately 64.3% of the issued and outstanding Common Stock, and 54.9% of the
aggregate shares of outstanding stock, including Common Stock and Class A Stock.

     In  connection  with the  change in  control  on  December  11,  1998,  the
Company's  directors as of such date appointed  Lawrence M. Powers a director of
the Company, and immediately  thereafter the Company's other directors resigned.
The  Company's  previous  officers  as of  December  11,  1998 also  resigned in
connection  with the  transaction.  Lawrence M.  Powers,  as the sole  remaining
member of the Board,  filled two vacancies by appointing  Maurice  Schonfeld and
Jon Gerber as directors of the Company. The new Board elected Lawrence M. Powers
as  Chairman  and Chief  Executive  Officer  and Mr.  Gerber as  Vice-President,
Secretary and  Treasurer.  The new Board also appointed  Robert  Ingenito to the
Board.  The prior Board was  informed  before  December 11, 1998 of the intended
transactions with Mr. Schonfeld and Mr. Ingenito described below.

     On December 12, 1998,  (a) Powers & Co.  transferred  500,000 shares of its
Common  Stock and a portion  of its  option  (representing  the right to acquire
300,000 shares of Common Stock) to Mr. Schonfeld for $100,000,  (b) Powers & Co.
transferred  by gift  200,000  shares of its common  stock of the  Company and a
portion of its option  (representing  the right to acquire  80,000 shares of the
Company's common stock) to Mr. Gerber, a second cousin of Mr. Powers, (c) Powers
& Co.  transferred by gift an aggregate of 1,305,000  shares of its common stock
of the Company and a portion of its option (representing the right to acquire an
aggregate of 730,000 shares of the Company's  common stock) to his son and other
individuals,  and (d) the Company  entered into a Stock Purchase  Agreement with
Mr.  Ingenito  pursuant to which Mr.  Ingenito  purchased  500,000 shares of the
Company's common stock and an option to acquire an additional  300,000 shares of
the Company's  common stock at an exercise  price of $0.15 per share for a total
purchase price of $100,000.

     Thereafter,  Steven Gross,  a partner in the law firm which now  represents
the  Company,  and his son  purchased  an  aggregate  of  500,000  shares of the
Company's common stock and options to acquire an aggregate of 300,000 additional
shares of the Company's common stock at an exercise price of $0.15 per share for
an aggregate  purchase price of $100,000.  In addition,  Powers & Co. and one of
its  transferees by gift have exercised their options and purchased an aggregate
of 1,380,000  additional  shares of the Company's  common stock for an aggregate
price of $207,000.

     As a result of the change in control,  as well as the  Company's  change in
strategic direction to Internet marketing, the Company determined that it cannot
and will not be utilizing any  pre-existing  net operating  loss  carryforwards.
Consequently, as announced in December, 1998, the Company's new Board determined
that the provision in the Company's  Certificate  of  Incorporation  and By-Laws
requiring  Board approval of transfers of the Company's  common stock to persons
or groups  which own or would  acquire 5% of the common stock would no longer be
enforced.


                                       10
<PAGE>

History of the Plan of Reorganization - 1995 through 1998

     On  January  26,  1995,  as part of prior  management's  effort to stem the
Company's  substantial   financial  losses,  the  Company,   together  with  its
wholly-owned  subsidiaries,  Computers Unlimited of Wisconsin, Inc., a Wisconsin
corporation  d/b/a  Computer Bay  ("Computer  Bay"),  Dealer  Services  Business
Systems,  Inc., a Delaware  corporation d/b/a Data One ("Data One") and Spectrum
Cellular Corporation ("Cellular") (collectively, the "Debtors"), filed petitions
for relief  under  Chapter 11 of the Federal  Bankruptcy  Code (the  "Chapter 11
proceeding").  A fourth wholly owned subsidiary,  Spectrum Global Services, Inc.
("Spectrum Global"), a Delaware corporation, did not file for bankruptcy and was
sold  by the  Company  effective  October  17,  1995.  Spectrum  Global  was not
essential to the  Company's  business.  Upon motion by the  Debtors,  the United
States  Bankruptcy  Court for the Eastern  District of New York (the "Bankruptcy
Court")  converted  the action for Computer Bay to a case under Chapter 7 of the
Bankruptcy  Code. A trustee is  overseeing  the  liquidation  of Computer  Bay's
assets and the Company has no control  over the  Computer  Bay estate.  Data One
consummated a separate  liquidating plan of  reorganization  on October 4, 1996,
which had been unanimously supported by Data One's voting creditors.

     In March 1996,  the Bankruptcy  Court approved the Company's  Third Amended
Disclosure  Statement  (the  "Disclosure  Statement")  with respect to the Third
Amended Consolidated Plan of Reorganization Proposed by the Company and Cellular
(the  "Plan")  dated as of March  18,  1996  finding  the  Disclosure  Statement
adequate for distribution and vote by interested parties. As contemplated by the
Plan, the bankruptcy estates of the Company and Cellular have been substantively
consolidated and thereafter prior to December 11, 1998, the Company and Cellular
had been  conducting  the Company's  business on an operating  basis as a single
entity.  On August 14, 1996, the United States  Bankruptcy  Court of the Eastern
District of New York entered an order confirming the Plan, as amended.  On March
31, 1997,  the Company  consummated  the Plan.  As stated  above,  the Company's
strategy from 1997 through 1998 did not result in a viable business. A change of
control  occurred  on  December  11, 1998 in  connection  with which  payment or
provision  was made for all known  liabilities  and a new direction was taken by
the new investor group.

Results of Operations

     The  following  discussion  relates in part to a  discontinued  business in
certain   wireless  data  patents  that   preceded  the   Company's   bankruptcy
reorganization  and the Company's  unsuccessful  FastLane  software  development
which are discussed above in the "Business"  section.  As discussed  above,  the
Company's  FastLane project was not viable and the Company was on the verge of a
bankruptcy   filing  when  new  management  took  over  on  December  11,  1998.
Consequently,  although the Company has a prior operating history, the Company's
prospects  must be  considered  primarily  in light of the risk that the Company
will not be able to find and  effectively  develop the web-site and  partnership
opportunities contemplated herein and/or to raise additional capital in the near
and long term.  Even if the  Company is able to do so, the  Company's  prospects
must  also be  considered  in  light of the  risks,  expenses  and  difficulties
frequently  encountered  by  companies  in their  early  stage  of  development,
particularly  companies in new and rapidly  evolving  markets such as web- sites
for the marketing of products and services.  Such risks for the Company include,
but are not limited to, an evolving and unpredictable business,  competition and
the management of growth.

     The following table sets forth, for the periods  indicated,  the percentage
relationship  that certain items bear to revenue.  This summary  provides  trend
data relating to the Company's normal recurring operations.

 (Amounts in thousands)
 Quarters Ended December 31,                1998       %        1997        %
-------------------------------------------------------------------------------
 Revenues                                $   209     100     $    68       100
                                         -------   -----     -------     -----
 Operating costs and expenses:
  Cost of revenues                             -       -           8        12
  Selling, general and administrative      1,668     798       1,217     1,790
                                         -------   -----     -------     -----
 Total operating costs and expenses        1,668     798       1,225     1,802
                                         -------   -----     -------     -----

 Operating income (loss)                 $(1,459)   (698)    $(1,157)   (1,702)
                                         -------   -----     -------     -----


                                       11
<PAGE>


 (Amounts in thousands)
 Nine months Ended December 31,             1998       %        1997        %
-------------------------------------------------------------------------------
 Revenues                                $ 2,324     100     $ 1,481       100
                                         -------   ------    --------   -------
 Operating costs and expenses:
  Cost of revenues                             -       -           8        12
  Selling, general and administrative      4,054     174       3,610       243
                                         -------   ------    --------   -------
 Total operating costs and expenses        4,054     174       3,662       247
                                         -------   ------    --------   -------

 Operating income (loss)                 $(1,730)    (74)    $(2,181)     (147)
                                         -------   ------    --------   -------


Revenues

     The  following  discussion  relates in part to a  discontinued  business in
certain   wireless  data  patents  that   preceded  the   Company's   bankruptcy
reorganization  and the Company's  unsuccessful  FastLane  software  development
which  are  discussed  above  in the  "Business"  section  of this  Management's
Discussion and Analysis of Financial  Condition and Results of Operations.  As a
result of the Company's change in business strategy discussed above, the Company
is unable to accurately forecast its future revenues.

     Revenues  increased  approximately  $141,000  or 207% and  $843,000 or 57%,
respectively,  for the  quarter  and nine  months  ended  December  31,  1998 as
compared to the quarter and nine months ended December 31, 1997 primarily due to
increased  one-time  licensing revenues of $171,000 or 450% and $966,000 or 72%,
respectively.  This  increase was partially  offset by a decline in  merchandise
sales for the quarter and nine months ended  December 31, 1998 of  approximately
$30,000 or 100% and  $123,000 or 94%,  respectively.  The  increase in licensing
revenues  for the nine months ended  December  31, 1998 is primarily  due to the
Company's  recognition of  approximately  $1,350,000 in revenues and $153,000 of
deferred royalty income in connection with an up-front fee pursuant to a license
agreement  that the Company  entered into during the current fiscal year and the
acceleration of a guaranteed  payment  pursuant to a licensing  agreement.  This
non-recurring  increase was partially offset by the decrease associated with the
renegotiation  of a license  agreement  the  Company  entered  into in the prior
fiscal year. The Company is not currently  aware of any  significant  unlicensed
manufacturers  that are  infringing  the  Company's  discontinued  wireless data
products and associated  patents,  is no longer carrying them at any value,  and
does not expect these patents to provide material future  revenues.  Merchandise
sales  decreased  for the  quarter  ended  December  31, 1998 as compared to the
quarter ended December 31, 1997 because of the effects of a licensing  agreement
the Company  entered into with a distributor to assume the Company's  activation
kit business during the third quarter of fiscal 1998.  Under the agreement,  the
distributor had committed to undertake  specified  marketing efforts intended to
stimulate  the  market  for  activated  cellular  capable  modems and to pay the
Company  a royalty  for each  activation  kit it  sells.  None were sold for the
quarter ended  December 31, 1998. See "Note 1(e) to the  Consolidated  Financial
Statements"  for a discussion  of the  renegotiation  of the  Company's  license
agreements.

Operating Costs and Expenses

     The  following  discussion  relates in part to a  discontinued  business in
certain   wireless  data  patents  that   preceded  the   Company's   bankruptcy
reorganization  and the Company's  unsuccessful  FastLane  software  development
which are discussed above in the "Business"  section of Management's  Discussion
and Analysis of Financial Condition and Results of Operations.

     Operating  costs and  expenses  for the three  months and nine months ended
December 31, 1998 increased  approximately  $443,000 or 36% and $392,000 or 11%,
respectively,  when compared to the three months and nine months ended  December
31, 1997 primarily due to increased selling, general and administrative expenses
of  approximately  $451,000  or 37%  and  $444,000  or 12%,  respectively.  This
increase was partially offset by decreased cost of sales of approximately $8,000
or 100% and $52,000 or 100%, respectively, for the quarter and nine months ended
December  31,  1998.  Cost of sales  decreased  as a direct  result of decreased
merchandise  sales for the quarter and nine months  ended  December  31, 1998 as
compared to the same periods in the prior year.



                                       12
<PAGE>


     The  increase  in  selling,  general and  administrative  expenses  for the
quarter and nine months ended  December 31, 1998 as compared to the same periods
in the prior year was  primarily  the result of increased  personnel and related
expenses of approximately $535,000 or 93% and $594,000 or 34%, respectively. All
such  employees  were  terminated  between  September  1998 and year-end.  These
increases  are the direct  result of severance  payments to former  employees in
connection with the "change of control" stock purchases in the Company by Powers
& Co. See  "Business."  Also,  during the quarter ended  December 31, 1998,  the
Company recorded a provision for idle equipment of approximately  $139,000.  See
"Note  1(f)  to the  Consolidated  Financial  Statements."  There  was  no  such
allowance during the period ended December 31, 1997. These increases were offset
by a decrease in outside services of approximately  $208,000 or 63% and $441,000
or 52%,  respectively,  for the three and nine months ended December 31, 1998 as
compared to the same periods in the prior fiscal year.

Operating Income (Loss)

     The  following  discussion  relates in part to a  discontinued  business in
certain   wireless  data  patents  that   preceded  the   Company's   bankruptcy
reorganization  and the Company's  unsuccessful  FastLane  software  development
which  are  discussed  above  in the  "Business"  section  of this  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     For the quarter  ended  December 31, 1998,  the  Company's  operating  loss
increased  approximately  $302,000  or 26% as  compared  to  the  quarter  ended
December 31, 1997 primarily due to increased operating costs and expenses.

     For the nine months ended December 31, 1998,  the Company's  operating loss
decreased  approximately  $451,000 or 21% as  compared to the nine months  ended
December 31, 1997 primarily due to increased licensing revenues.

Other Income and Expense

     The  following  discussion  relates in part to a  discontinued  business in
certain   wireless  data  patents  that   preceded  the   Company's   bankruptcy
reorganization  and the Company's  unsuccessful  FastLane  software  development
which  are  discussed  above  in the  "Business"  section  of this  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     For the three months and nine months ended December 31, 1998,  other income
increased approximately $364,000 or 1040% and $333,000 or 241%, respectively, as
compared  to the same  periods  in the prior  year as a result  of a  settlement
agreement  entered  into in  December,  1998  between  the  Company and a former
employee whereby the Company paid  approximately  $229,000 in full settlement of
any potential future indemnification.  See "Legal Proceedings." As a result of
these payments,  the Company recognized  approximately $400,000 in other income.
This  increase  was offset by a decrease  in  interest  income of  approximately
$25,000 or 71% and  $105,000  or 78%,  respectively,  for the  quarter  and nine
months ended  December 31, 1998 as compared to the quarter and nine months ended
December 31, 1997.  Interest income decreased because the Company had lower cash
balances for the three and nine months  ended  December 31, 1998 than during the
three and nine months ended December 31, 1997.

 Liquidity and Capital Resources

     The  following  discussion  relates in part to a  discontinued  business in
certain   wireless  data  patents  that   preceded  the   Company's   bankruptcy
reorganization  and the Company's  unsuccessful  FastLane  software  development
which  are  discussed  above  in the  "Business"  section  of this  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     During  September 1998, the Company's  available cash balance dropped below
$400,000 and the Company was in danger of being unable to remain  current on its
obligations,  including payroll.  The Company,  however, was able to renegotiate
two licensing  agreements and  accelerate  the payment of royalties  pursuant to
those  agreements.  The Company  used these  funds for  operating  expenses  and
winding down the FastLane business.

     During the nine months ended December 31, 1998,  working  capital  (current
assets less current liabilities)  decreased by approximately $38,000 to $973,000
due to a decrease in the Company's  current  assets and current  liabilities  of
approximately $1,422,000 and $1,384,000, respectively. Cash and cash equivalents


                                       13
<PAGE>

decreased approximately $989,000 for the nine months ended December 31, 1998 due
to the payment of operating  expenses and severance to former employees.  During
the nine months ended  December 31, 1998,  net  receivables  and employee  loans
decreased   approximately  $170,000  and  $79,000,   respectively.   Receivables
decreased  as a result  of  payments  received  pursuant  to  certain  licensing
agreements.  See  "Note  1(e) to the  Consolidated  Financial  Statements."  The
Company  called its employee  loans  during the period ended  December 31, 1998.
These  loans were  collateralized  by the  Company's  Common  Stock.  The former
employees  elected to default on their  respective loans resulting in a decrease
in  employee  loans and an  increase in treasury  stock.  These  decreases  were
partially  offset by the  elimination of the  litigation  reserve of $645,000 as
well as the reduction in accounts  payable and accrued expenses of approximately
$163,000 and $398,000, respectively.

     Net cash used by operating activities  decreased $101,000,  from $1,946,000
to $1,845,000  during the nine months ended  December 31, 1997.  During the nine
months  ended  December 31, 1997,  the Company  paid  approximately  $441,000 in
Chapter 11 claims in connection  with the Plan and made no such payments  during
the period reported.  See "History of the Plan of  Reorganization - 1995 through
1998." However, during the nine months ended December 31, 1998, the Company paid
approximately  $229,000  pursuant  to  a  settlement  agreement  with  a  former
employee.  See "Legal  Proceedings." Also, during the quarter ended December 31,
1998,  the  Company  elected to record a  provision  for its idle  equipment  of
approximately   $139,000.   See  "Note  1(f)  to  the   Consolidated   Financial
Statements."  During the same period in the prior fiscal year, there was no such
provision.

     Net  cash  provided  by  investing  activities  decreased  $1,236,000  from
$1,614,000  for the nine months ended December 31, 1997 to $378,000 for the nine
months ended December 31, 1998. The decrease was primarily related to the amount
of marketable  securities sold. During the periods  presented,  the Company sold
its marketable securities in order to fund current operations.

     Net cash provided by financing activities increased  approximately $930,000
during the nine months ended December 31, 1998 as compared to the same period in
the prior year.  This  increase was  directly  related to the issuance of common
stock pursuant to the December 11, 1998 agreement between the Company and Powers
& Co.  as well as the  subsequent  agreements  for an  aggregate  investment  of
$1,007,000.  See  "Business."  Also,  during the period  presented,  the Company
purchased  approximately  $80,000  of  treasury  stock as  opposed to the $3,000
purchase during the nine months ended December 31, 1997.

 Year 2000

     The year 2000 issue  arises from the  widespread  use of computer  programs
that rely on two-digit  date codes to perform  computations  or  decision-making
functions.  As discussed in the "Business" section above, in December of 1998, a
new  investor  acquired a  controlling  interest in the  Company and  thereafter
additional   investors  also  purchased  newly  issued  stock  and  options.  In
connection  with this change in control,  the Company's  senior  management  and
Board of  Directors  were  replaced.  The new senior  management  and Board have
indicated their intention to establish  Internet  web-sites for the marketing of
products and services but have not  finalized any specific  projects yet.  Until
the Company  commences  such a new project,  the Company is conserving  its cash
resources.  In  addition,  as discussed  above,  the Company does not expect the
former   businesses  of  the  Company  related  to  wireless  data  transmission
technology  and FastLane  compression  software to provide any  material  future
revenues.  Thus, the Company  believes that the consequences of year 2000 issues
would not have a  material  effect on its  business,  results of  operations  or
financial condition at this time.

     If and when the Company  consummates  a project to  establish  and Internet
web-site for the marketing of products or services, management will review plans
to prepare the Company's computer systems and applications for the year 2000, as
well as identify  critical  third  parties  which the Company  will rely upon to
operate its business to assess their readiness for the year 2000.

Risk Factors
     
     Overview.  As discussed in the "Business"  section  above,  the Company has
changed its  strategic  direction.  While the Company had  suffered  significant
losses from previous  operations,  all those  operations have  essentially  been
discontinued.  The Company is now seeking to  establish  several  web-sites  for
marketing products and services over the Internet.


                                       14
<PAGE>

     The following  specific risk factors should be considered in evaluating the
Company's ability to achieve its business objectives.

     Commencement of Projects.  The Company's strategy depends on its ability to
find  and  effectively  develop  the  web-site  and  partnership   opportunities
contemplated  herein. There can be no assurance that the Company will be able to
do so or that the Company's overall strategy will be successful.

     Limited Capital  Resources.  Giving effect to the recent  investment in the
Company,  the Company's December 31, 1998 working capital has still decreased to
approximately  $973,000.  The Company therefore has limited capital resources to
invest in development, marketing and selling. Management has taken the proactive
steps of closing the Company's leased facilities in Marlboro,  Massachusetts and
Purchase,  New York and expects to open a smaller facility in the future.  These
steps have been taken to preserve the  Company's  capital for future use.  There
can be no assurance that the Company will be able to raise sufficient additional
capital in the near and long term.

     Competition.  The market for  Internet  web-sites  providing  products  and
services is intensely  competitive.  The Company expects competition to persist,
intensify and increase in the future,  and for capital  costs to also  increase.
There can be no assurance that the Company will be able to compete  successfully
against its competitors.  In order to successfully  compete in this market,  the
Company  must be  able to  build  brand  recognition  and  develop  a  dedicated
following.

     Dependence  on Key  Personnel.  The Company is  dependent on its ability to
retain and motivate highly qualified personnel,  especially its management.  The
loss of the services of any of its key executive  officers could have a material
adverse  effect on the  Company's  business  or the  Company's  ability to raise
capital.  No employees have yet been put on salary,  and present  management has
been working without  receiving any compensation.  Other employees  necessary to
build the business will require competitive  compensation and present management
may receive compensation for future time commitments if and when and the Company
is able pay it. In  addition,  the Company  currently  does not have a long-term
employment agreement with any of its executive officers.

     Market Listing;  Volatility of Stock Price.  Spectrum was delisted from the
NASDAQ National Market in April 1995. Since then, the Company's common stock has
been  traded on the OTC  Bulletin  Board.  Since the  Company's  emergence  from
Chapter 11, in March 1997,  the market for the  Company's  common stock has been
relatively illiquid and subject to wide fluctuations.  There can be no assurance
that an active public  market for the Company's  common stock will develop or be
sustained. Further, the market price of the Company's common stock may be highly
volatile based on quarterly  variations in operating  results,  announcements of
technological innovations or new products by the Company or its competitors,  or
other events or factors.

     Shares Eligible for Future Sale. The preferred stock that was issued to the
plaintiffs to settle class action litigation pursuant to the Plan is convertible
to common  stock upon request of the holder,  and all such shares  automatically
convert  to common  stock on March 31,  1999.  Conversion  to common  stock of a
significant  number of shares of preferred  stock and a  subsequent  sale in the
public market could  adversely  affect the future market price for the Company's
common stock.


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings 

   Securities Related Proceedings

     As  previously  reported by the Company,  during May 1997,  the SEC and the
Company  reached a settlement  agreement  under which the Company  agreed to the
entry  of  an  administrative  order  requiring  it to  cease  and  desist  from
committing any and future violations of the registration,  antifraud,  reporting
and  record-keeping  provisions  of the  federal  securities  laws.  The Company
neither  admitted nor denied the SEC's  findings  relative to events in 1992 and
1993, and which relate to the  allegations in the SEC's action  described  above
against  the  former  officer.  The SEC  did not  seek  monetary  penalties  and
recognized that the Company's then current Chief Executive  Officer and Board of
Directors had cooperated in the SEC's  investigation.  Such "current"  group was
part of the management which resigned in December 1998.

     In  December  1997,  the SEC filed a civil  lawsuit  in the  United  States
District  Court for the  Eastern  District  of New York  against a then  current
employee (who resigned in December 1998) and former officer of the Company,  and
two of the  Company's  former  directors  and officers  alleging  violations  of
certain  sections of the Securities  Exchange Act of 1934 and rules  promulgated


                                       15
<PAGE>

thereunder,  including  violations  of Rule  10b-5,  related to  accounting  and
disclosure issues with respect to certain patent and advertising  agreements the
Company  entered into during 1993  (fiscal  1994) and the exercise of options to
purchase and subsequent  sale of the Company's stock in the relevant time frame.
As previously  reported by the Company,  the Sec notified the former  officer in
April 1996 that it  intended  to bring this  action.  Upon  learning  of the SEC
staff's position and pending  resolution of this issue, the Company at that time
removed  the former  officer as an  executive  officer.  The former  officer has
denied any wrongdoing and is represented by independent  counsel in this matter.
The former  officer  sought to have the  Company  advance the legal fees that he
incurs in defense of this  action  pursuant  to his  bankruptcy  court  approved
employment  agreement.  In December  1998,  the  Company and the former  officer
reached a settlement that limited the Company's  exposure to a one-time  payment
of $229,000 as described in "Item 2, Liquidity and Capital Resources.".

     From time to time,  the Company has been a party to other legal actions and
proceedings  incidental  to  prior  business.  As of the  date of  this  report,
however,  the Company knows of no other pending or threatened legal actions that
could have a material impact on the financial condition of the Company.

Item 2.   Changes in Securities

     Unregistered  Issuances of Stock.  As discussed in the  "Business"  section
above,  (a) on December  11,  1998,  the Company  sold an aggregate of 3,000,000
shares of the  Company's  common  stock and  options  to  purchase  an  addition
1,800,000  additional shares of the Company's common stock for an exercise price
of $0.15 per share (exercisable from December 11, 1998 through December 11, 2003
(the "December 11 Options")) for an aggregate price of $600,000, (b) on December
12,  1998,  the Company sold an  aggregate  of 500,000  shares of the  Company's
common stock and options to purchase an addition  300,000  additional  shares of
the Company's common stock for an exercise price of $0.15 per share (exercisable
from  December  12, 1998 through  December  12, 2003) for an aggregate  price of
$100,000, and (c) on December 21, 1998, the Company sold an aggregate of 500,000
shares of the Company's common stock and options to purchase an addition 300,000
additional  shares of the Company's  common stock for an exercise price of $0.15
per share  (exercisable from December 21, 1999 through December 21, 2003) for an
aggregate  price of  $100,000.  On  December  24,  1998,  Options to purchase an
aggregate of 1,380,000  additional  shares were exercised by the holders thereof
for an  aggregate  exercise  price of  $207,000.  No  underwriters  were used in
connection with any of the foregoing sales. All sales were made in reliance upon
an exemption from the  registration  requirements of the Securities Act of 1933,
as amended  (the  "Securities  Act")  provided,  in each case,  by Section  4(1)
thereof.  The acquirors of such securities made certain  representations  to the
Company as to, among other  things,  investment  intent,  that they  possessed a
sufficient level of financial  sophistication and that they received information
about the Company.  The securities  issued in the  transactions  were subject to
restrictions  on transfer absent  registration  under the Securities Act, and no
offers to sell the securities  were made by any form of general  solicitation or
general advertisement


Item 3.   Defaults Upon Senior Securities
          None

Item 4.   Submission of Matters to Vote of Security Holders
          None

Item 5.   Other Information
          None

Item 6.   Exhibits and Reports on Form 8-K
          
     A.   Exhibits

          No. 


          10.1 The Stock  Purchase  Agreement  between Powers & Co. and Spectrum
               Information  Technologies,  Inc.  dated  December  11,  1998  was
               previously filed as an exhibit to the Company's Current Report on
               Form 8-K filed  December 11,  1998,  and  incorporated  herein by
               reference.

          27   Financial Data Schedule

          99.1 Press Release dated December 14, 1998

          99.2 Press Release dated December 17, 1998


                                       16
<PAGE>

          99.3 Press Release dated December 21, 1998

          99.4 Press Release dated December 29, 1998


     B.   Reports on Form 8-K

          The  Company  filed a Current  Report on Form 8-K dated  December  11,
          1998,  which  included:  Item 1,  "Changes  in Control of  Registrant"
          reporting  that the Company,  on December  11,  1998,  sold a majority
          interest in the Company to an investor.







































                                       17
<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:    February 12, 1999


                         SPECTRUM INFORMATION TECHNOLOGIES, INC.

                         By: /s/ Lawrence Powers
                             Lawrence Powers
                             Chief Executive Officer and
                             Chairman of the Board of Directors


                         By: /s/ Jon Gerber
                             Jon Gerber
                             Vice President, Secretary and Treasurer
























                                       18

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                              Exhibit 27
                        Financial Data Schedule