<PAGE>
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K/A
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 2, 1999
EARTHWEB INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-25017 13-3899472
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
3 PARK AVENUE, NEW YORK, NEW YORK 10016
(Address of Principal Executive Offices) (Zip Code)
(212) 725-6550
(Registrant's telephone number, including area code)
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION.
(a) Financial Statements of Business Acquired.
2
<PAGE>
Report of Independent Accountants
To the Board of Directors of
D&L Online, Inc.:
In our opinion, the accompanying balance sheets present fairly, in all material
respects, the financial position of D&L Online, Inc. as of December 31, 1998
and 1997, and the related statements of earnings, stockholders' equity and cash
flows for each of the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these fi-
nancial statements based on our audits. We conducted our audits of these state-
ments in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and signifi-
cant estimates made by management, and evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Omaha, Nebraska
January 22, 1999
3
<PAGE>
D&L Online, Inc.
Balance Sheets
<TABLE>
<CAPTION>
---------------------
As of December 31,
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 319,870 $ 268,213
Accounts receivable, net of allowance for bad debts of
$48,664 in 1998....................................... 592,968 348,593
---------- ----------
Total current assets................................. 912,838 616,806
Fixed assets, net...................................... 504,534 435,967
Other assets........................................... 45,751 25,598
---------- ----------
Total assets......................................... $1,463,123 $1,078,371
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses and accounts payable.................. $ 427,077 $ 518,292
Deferred revenue....................................... 329,029 82,527
Notes payable.......................................... 470,000 276,940
---------- ----------
Total current liabilities............................ 1,226,106 877,759
Commitments and contingencies
Stockholders' equity:
Common stock, par value $1 per share; 3,000,000 shares
authorized, 1,000 shares issued and outstanding....... 1,000 1,000
Additional paid-in capital............................. 7,433 7,433
Retained earnings...................................... 228,584 192,179
---------- ----------
Total stockholders' equity........................... 237,017 200,612
---------- ----------
Total liabilities and stockholders' equity........... $1,463,123 $1,078,371
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
D&L Online, Inc.
Statements of Earnings
<TABLE>
<CAPTION>
-----------------------
Year ended December 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenues.............................................. $ 7,736,921 $ 3,673,107
Cost of revenues...................................... 1,072,537 781,490
----------- -----------
Gross profit...................................... 6,664,384 2,891,617
Operating expenses:
Sales and marketing................................. 2,287,447 926,197
General and administrative.......................... 4,140,265 1,762,129
Depreciation and amortization....................... 208,297 156,162
----------- -----------
Total operating expenses.......................... 6,636,009 2,844,488
----------- -----------
Operating income...................................... 28,375 47,129
Interest and other income (expense), net.............. 8,030 (17,929)
----------- -----------
Net earnings.......................................... $ 36,405 $ 29,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
D&L Online, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
--------------------
Year
ended
December 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 36,405 $ 29,200
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.......................... 208,297 156,162
Gain on sale of fixed assets........................... (6,251) --
Non cash compensation expense.......................... 300,000 110,000
Allowance for doubtful accounts........................ 48,664 --
Changes in operating assets and liabilities:
Accounts receivable................................... (293,039) (215,988)
Other assets.......................................... (20,153) (17,811)
Accounts payable and accrued expenses................. (91,215) 328,422
Deferred revenue...................................... 246,502 75,128
--------- ---------
Net cash provided by operating activities............ 429,210 465,113
--------- ---------
Cash flows from investing activities:
Purchase of fixed assets................................ (306,797) (274,482)
Proceeds from sale of fixed assets...................... 36,184 --
--------- ---------
Net cash used in investing activities................ (270,613) (274,482)
--------- ---------
Cash flows from financing activities:
Stockholder distributions............................... -- (40,000)
Payments on notes payable............................... (106,940) (97,438)
--------- ---------
Net cash used in financing activities................ (106,940) (137,438)
--------- ---------
Net increase in cash for the period.................. 51,657 53,193
Cash and cash equivalents, beginning of period........... 268,213 215,020
--------- ---------
Cash and cash equivalents, end of period................. $ 319,870 $ 268,213
========= =========
Supplemental disclosure of cash flow information:
Interest paid............................................ $ 14,173 $ 23,599
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
D&L Online, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
------------------------------------------
Additional
Paid- Retained
Common Stock in Capital Earnings Total
------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1996....... $1,000 $7,433 $202,979 $211,412
Net earnings....................... -- -- 29,200 29,200
Stockholder distributions.......... -- -- (40,000) (40,000)
------------ ---------- -------- --------
Balance at December 31, 1997....... 1,000 7,433 192,179 200,612
Net earnings....................... -- -- 36,405 36,405
------------ ---------- -------- --------
Balance at December 31, 1998....... $1,000 $7,433 $228,584 $237,017
============ ========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
D&L Online, Inc.
Notes to Financial Statements
1. The Company
D&L Online, Inc. (the "Company") was incorporated in the State of Iowa on No-
vember 26, 1991. The Company maintains a job search Web site for computer pro-
fessionals. This Web site is offered to professional recruiters, who, for a
monthly fee, are given access to post job listings for programmers, software
engineers, system administrators, Web developers, hardware engineers, and oth-
ers involved in high technology industries.
2. Significant Accounting Policies and Procedures
Revenue Recognition
Advertising revenues from Web site postings are recognized over the period the
ads are displayed.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original ma-
turities of three months or less to be cash equivalents.
Financial Instruments
The recorded amounts of financial instruments approximate their fair value.
Fixed Assets
Depreciation of computer equipment, furniture and fixtures and computer soft-
ware is provided for by the straight-line method over the estimated useful life
ranging from three to five years. Amortization of leasehold improvements is
provided for over the lesser of the term of the related lease or the estimated
useful life of the improvement. The cost of additions and betterments is capi-
talized and repairs and maintenance costs are charged to operations in the pe-
riods incurred.
Income Taxes
The Company has elected Subchapter S corporation status and as such, substan-
tially all income tax liabilities are the responsibility of the stockholders.
Risks and Uncertainties
The Company and its prospects are subject to the risks, expenses and uncertain-
ties frequently encountered by companies in the new and rapidly evolving mar-
kets for Internet products and services. These risks include the failure to
develop and extend the Company's online service brands, the rejection of the
Company's services by Web consumers, vendors and/or advertisers, the inability
of the Company to maintain and increase the levels of traffic on its online
services, as well as other risks and uncertainties. In the event that the Com-
pany does not successfully implement its business plan, certain assets may not
be recoverable.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities, disclosure of con-
tingent assets and liabilities at the date of the financial statements and re-
ported amounts of revenue and expenses during the reporting period. Actual re-
sults could differ from these estimates.
Long-Lived Assets
The carrying value of assets is reviewed on a regular basis for the existence
of facts or circumstances, both internally and externally, that suggest impair-
ment. To date, no such impairment has been indicated. Should there be an im-
pairment in the future, the Company will determine the impairment based on a
comparison of recorded amounts to the expected future cash flows from the im-
paired assets. The cash flow estimates will contain management's best esti-
mates, using appropriate and customary assumptions and projections at the time.
8
<PAGE>
D&L Online, Inc.
Notes to Financial Statements--(Continued)
3. Fixed Assets
Fixed assets consists of the following:
<TABLE>
<CAPTION>
---------------------
<S> <C> <C>
Computer equipment and software........................ $ 549,793 $ 470,054
Furniture and fixtures................................. 299,945 159,638
Leasehold improvements................................. 95,186 95,186
--------- ---------
944,924 724,878
Less accumulated depreciation and amortization......... 440,390 288,911
--------- ---------
$ 504,534 $ 435,967
========= =========
</TABLE>
Depreciation and amortization for the years ended December 31, 1998 and 1997
totaled $208,297 and $156,162, respectively.
4. Commitments and Contingencies
The Company leases office space under noncancelable operating leases expiring
at various dates through 2002. Future minimum lease payments under noncancel-
able operating leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
1999............................................................ $ 144,939
2000............................................................ 161,210
2001............................................................ 145,321
2002............................................................ 15,000
----------
Total......................................................... $ 466,470
==========
</TABLE>
Rent expense was $146,018 and $112,560 for the years ended December 31, 1998
and 1997, respectively.
5. Employee Savings Plan
The Company has a savings plan (the "Savings Plan") that qualifies as a de-
ferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a portion of their
pretax earnings, up to the Internal Revenue Service annual contribution limit.
The Company matches 35% of the first 10% contributed by each employee. The
Company's contributions totaled $22,229 and $21,727 for the years ended Decem-
ber 31, 1998 and 1997, respectively.
6. Notes Payable
Notes payable represent amounts due under the following:
<TABLE>
<CAPTION>
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Term loan payable to bank. Paid off in 1998.......... $ -- $ 106,940
8% unsecured notes payable to stockholders of the
Company............................................. 470,000 170,000
---------- ----------
$ 470,000 $ 276,940
========== ==========
</TABLE>
The notes payable to stockholders of the Company have no set maturity dates or
repayment provisions and as such, are reflected as current debt. These notes
represent cumulative noncash compensation payable to the stockholders of the
Company.
7. Stock Option Program
The Company has implemented a stock option program effective as of December 31,
1998. Total stock to be offered under this program will not exceed 100 shares.
On December 31, 1998, the Company granted options to purchase 50 shares of com-
mon stock. These options, which have an exercise price of $23,500 per share,
vest 25% per year beginning December
9
<PAGE>
D&L Online, Inc.
Notes to Financial Statements--(Continued)
31, 1999 through December 31, 2002. The unexercised portion of the options ex-
pire December 31, 2008. No options have been exercised through December 31,
1998.
The Company has adopted the disclosure-only provisions of Statement of Finan-
cial Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the stock option
plan. Net earnings for 1998 would have remained as reported had compensation
cost been determined based on the fair value at the grant date for the 1998
award, as the options were granted on December 31, 1998. The fair value of each
option at the date of grant was $11,690. The fair value of the stock options
was estimated using the Black-Scholes option pricing method with the following
assumptions: risk-free interest rate of 7%; zero dividend yield; and expected
option life of 10 years.
8. Related Party Transactions
Included in general and administrative expenses is compensation paid to the
stockholders of the Company. These salaries and bonuses totaled $3,200,000 and
$1,161,538 for the years ended December 31, 1998 and 1997, respectively.
9. Recent Accounting Pronouncements
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5, which is effective for
fiscal years beginning after December 15, 1998, provides guidance on the finan-
cial reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
adoption of this standard is not expected to have a significant impact on the
Company's results of operations, financial position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS No. 133"), which establishes accounting and report-
ing standards for derivative instruments, including certain derivative instru-
ments embedded in other contracts (collectively referred to as derivatives) and
for hedging activities. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. As the Company does not currently
engage or plan to engage in derivative or hedging activities there will be no
impact to the Company's results of operations, financial position or cash flows
upon the adoption of this standard.
10
<PAGE>
Unaudited Pro Forma Condensed Consolidated Financial Information
In February 1999, EarthWeb acquired D&L Online, Inc., which operates dice.com.
The total purchase price was approximately $35.0 million. The consideration
paid by EarthWeb to acquire D&L Online consisted of (a) $7.0 million in cash,
$4.0 million of which was paid at closing, with the balance payable over the
next year in two installments, (b) 577,778 shares of EarthWeb common stock,
valued at $26.0 million, based upon the average stock price of $45.00 from Jan-
uary 26, 1999 through February 9, 1999 and (c) additional future "earnout" pay-
ments, based on the performance of the surviving entity in the merger and re-
lated businesses, in the form of EarthWeb common stock and/or cash with an ag-
gregate value of up to $12.0 million, of which such amounts are payable over a
period of 3 years based on achievement of certain revenue targets. Under the
terms of the agreement and a related escrow agreement, an aggregate of 57,778
shares of such EarthWeb common stock will be held in escrow for 18 months to
insure payment by certain selling shareholders of indemnification claims. The
amount of consideration paid by EarthWeb was reached through arm's length nego-
tiations and was funded through the issuance of EarthWeb common stock and from
the proceeds of EarthWeb's initial public offering. The fair value of the op-
tions of approximately $733,000 was determined using the Black-Scholes options
pricing model. The following assumptions were used in the options pricing mod-
el: stock price of approximately $45.00, exercise price of $32.05, term of 3
years, risk free rate of interest of 5%, 50% volatility and a dividend yield of
0%.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1998 gives effect to the acquisition of D&L Online as
if it had occurred on January 1, 1998 and is based on the historical results of
operations of the Company and D&L Online for the year ended December 31, 1998.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to
the acquisition of D&L Online as if the acquisition had occurred on December
31, 1998. The Unaudited Pro Forma Condensed Consolidated Statement of Opera-
tions and the Unaudited Pro Forma Condensed Consolidated Balance Sheet and the
accompanying notes should be read in conjunction with the historical financial
statements of the Company and D&L Online and notes thereto.
The Unaudited Pro Forma Condensed Consolidated Financial Information is in-
tended for informational purposes only and is not necessarily indicative of the
future financial position or future results of operations of the consolidated
company after the acquisition of D&L Online or of the financial position or re-
sults of operations of the consolidated company that would have actually oc-
curred had the acquisition of D&L Online been effected on January 1, 1998.
11
<PAGE>
EarthWeb Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
-------------------------------------------------------------------
As of December 31, 1998
------------------------------
Pro Forma Pro Forma
EarthWeb Inc. D&L Online, Inc. Adjustments Total
------------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $25,292,229 $ 319,870 $ (4,360,000)(1a) $21,252,099
Accounts receivable,
net.................... 1,143,681 592,968 -- 1,736,649
Other current assets.... 828,686 -- -- 828,686
------------- ---------------- --------------- -----------
Total current assets.. 27,264,596 912,838 (4,360,000) 23,817,434
Fixed assets, net....... 2,068,752 504,534 -- 2,573,286
Goodwill and intangible
assets, net............ 1,069,220 -- 34,112,337 (1b) 35,181,557
Other assets............ 74,816 45,751 -- 120,567
------------- ---------------- --------------- -----------
Total assets.......... $30,477,384 $1,463,123 $29,752,337 $61,692,844
============= ================ =============== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable and
accrued expenses....... $ 3,324,883 $ 427,077 500,000 (1f) 4,251,960
Other current
liabilities............ 234,410 329,029 (243,656)(1c) 319,783
Notes payable........... -- 470,000 1,500,000 (1d) 1,970,000
------------- ---------------- --------------- -----------
Total current
liabilities.......... 3,559,293 1,226,106 1,756,344 6,541,743
Other liabilities....... 65,686 -- 1,500,000 (1d) 1,565,686
Stockholders' equity.... 26,852,405 237,017 26,495,993 (1e) 53,585,415
------------- ---------------- --------------- -----------
Total liabilities and
stockholders'
equity.............. $30,477,384 $1,463,123 $29,752,337 $61,692,844
============= ================ =============== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
EarthWeb Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
<TABLE>
<CAPTION>
--------------------------------------------------------
For the year ended December 31, 1998
--------------------------------------------------------
EarthWeb D&L Pro Forma Pro Forma
Inc. Online, Inc. Adjustments Total
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues................ $ 3,349,165 $ 7,736,921 $ -- $ 11,086,086
Cost of revenues........ 2,131,593 1,072,537 -- 3,204,130
----------- ------------ ----------- ------------
Gross profit............ 1,217,572 6,664,384 -- 7,881,956
----------- ------------ ----------- ------------
Operating expenses:.....
Product development... 1,475,665 -- -- 1,475,665
Sales and marketing... 4,546,839 2,287,447 -- 6,834,286
General and
administrative....... 3,356,567 4,140,265 (2,800,000)(2a) 4,696,832
Depreciation and
amortization......... 1,115,698 208,297 7,580,519 (2b) 8,904,514
----------- ------------ ----------- ------------
Total operating
expenses........... 10,494,769 6,636,009 4,780,519 21,911,297
----------- ------------ ----------- ------------
Operating (loss)
income................. (9,277,197) 28,375 (4,780,519) (14,029,341)
Interest and other
income, net............ 307,409 8,030 -- 315,439
Income taxes............ -- -- 1,120,000 (2a) 1,120,000
----------- ------------ ----------- ------------
Net (loss) income....... $(8,969,788) $ 36,405 $(5,900,519) $(14,833,902)
=========== ============ =========== ============
Basic net loss per
share.................. $ (2.37) $ (3.40)
=========== ============
Weighted average shares
used in computing basic
net loss per share..... 3,782,575 577,778 (2c) 4,360,353
=========== =========== ============
Supplemental pro forma
basic net loss per
share(2d) ............. $ (1.53) $ (2.30)
=========== ============
Weighted average shares
used in supplemental
pro forma basic net
loss per share(2d)..... 5,880,467 6,458,245
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
13
<PAGE>
EarthWeb Inc.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information
(1) Pro Forma Adjustments and Assumptions
The pro forma adjustments to the unaudited pro forma condensed consolidated
balance sheet, assuming the acquisition occurred on December 31, 1998, are as
follows:
1(a) Adjustment to record cash payment of $4,360,000 in connection with
the D&L Online acquisition.
1(b) Adjustment to calculate goodwill and intangible assets and to allo-
cate purchase price over the estimated fair value of net assets ac-
quired of D&L Online, calculated as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
Cash portion of purchase price.............................. $ 4,360,000
Value of stock and option portion of purchase price(/1/).... 26,733,010
Payable portion of purchase price........................... 3,000,000
Transaction costs........................................... 500,000
-----------
Purchase price.............................................. 34,593,010
Less: fair value of net assets to be acquired............... 480,673
-----------
34,112,337
Customer list and other intangibles......................... (15,800,000)
-----------
Goodwill.................................................... $18,312,337
===========
</TABLE>
(1) The value of the common stock issued to D&L Online was determined to
be $45.00 a share.
1(c) Adjustment to deferred revenue to record the balance of the future
obligation of existing subscriptions at its fair value.
1(d) Adjustment to record current and long-term portion of note payable to
D&L Online stockholders as part of the total consideration paid.
1(e) Adjustment to reflect the issuance of 577,778 shares of common stock
issued in connection with the D&L Online acquisition.
1(f) Adjustment to record approximately $500,000 of expenses incurred in
connection with the acquisition of D&L Online.
The pro forma adjustments to the unaudited pro forma condensed consolidated
statement of operations, assuming the acquisition occurred on January 1, 1998,
are as follows:
2(a) Adjustment of $2.8 million due to D&L Online's S corporation distri-
bution which was recorded as compensation expense that will not be
incurred in the future, as well as to record the associated tax
charge of $1.2 million which does not assume the utilization of
EarthWeb's net operating loss carryforwards.
2(b) Adjustment to depreciation and amortization to reflect the amortiza-
tion of goodwill and intangible assets of approximately $7.6 million
resulting from the acquisition of D&L Online, over an approximate 4.5
year period, the expected period of benefit.
2(c) Adjustment of weighted average shares of common stock outstanding of
577,778 used in computing basic and diluted net loss per share to re-
flect the issuance of 577,778 shares of common stock as of January 1,
1998.
2(d) The supplemental pro forma net loss per share amount is computed by
using the sum of the weighted average number of shares of common stock
and the 2,439,833 shares of common stock issued in November 1998 upon
conversion of preferred stock as if it had been converted on January 1,
1998.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the reg-
istrant has duly caused this report to be signed on its behalf by the under-
signed hereunto duly authorized.
EARTHWEB INC.
/s/ Jack D. Hidary
By:
--------------------------------------
Jack D. Hidary
President and Chief Executive Offi-
cer
Dated: April 15, 1999
15
