CLIFTON PARK, N.Y., Oct. 29 /PRNewswire-FirstCall/ -- On2
Technologies, Inc. (NYSE Amex: ONT), a leader in video compression
solutions, today announced quarterly results for the period ending
September 30, 2009. Revenue in the third quarter of 2009 was $5.3
million, an increase of 6% from the third quarter of 2008, and an
increase of 5% from the prior quarter. On a GAAP basis, third
quarter net loss was ($1.6) million, or ($0.01) per share, compared
to a net loss of ($29.1) million, or ($0.17), in the third quarter
of 2008. Net loss in the third quarter of 2009 includes $2.0
million in costs associated with the previously announced merger
agreement with Google Inc. and $146,000 in restructuring expenses.
Net loss in the third quarter of 2008 includes $26.2 million in
non-cash asset impairment charges. Matt Frost, Chief Operating
Officer and interim Chief Executive Officer of On2 Technologies
said, "We delivered a solid third quarter with revenue growth again
driven largely by a strong performance for Hantro(TM) products from
our On2 Finland operation. While we are pleased with our third
quarter performance, we recognize that our revenue is still subject
to quarter-to-quarter variability. For instance, in the third
quarter, we closed a $1.4 million Hantro licensing transaction with
a top 5 semiconductor company that had been in our pipeline for
several quarters. Deals of that magnitude, which unfortunately do
not arise every quarter, have a significant effect on quarterly
revenue." "We believe the macro environment has created pent-up
demand in the semiconductor industry, which has benefited our On2
Finland operation and may contribute to the period-to-period
variability. The announcement of the proposed acquisition of On2 by
Google also appears to have had a modest positive impact on sales
in the third quarter." "We remain excited about our proposed merger
with Google, but are continuing to manage the company in a
business-as-usual manner as we await our shareholder vote on the
deal. While we are still in the process of finalizing the
definitive Proxy Statement/Prospectus to be mailed to On2
stockholders prior to the On2 special meeting, we continue to
anticipate completing our proposed merger with Google during the
fourth quarter of 2009, subject to stockholder approval and
satisfaction of other closing conditions." Third Quarter Business
Highlights -- Royalties were $750,000 in the third quarter, a
decrease of 22% year-over-year and 36% sequentially. Royalties
represented 14% of revenue in the quarter, compared with 19% of
revenue in the third quarter of 2008 and 24% of revenue in the
second quarter of 2009. -- In the third quarter of 2009, On2 added
31 new customers, excluding online sales, with 14 transactions in
the quarter that contributed over $50,000 each to revenue. While
the number of new customers decreased from 57 a year ago and 40 in
the prior quarter, the number of transactions over $50,000
increased from 9 a year ago and 13 in the prior quarter. -- In
September, On2 announced that videantis, a provider of programmable
video engines, licensed VP6® video decoder source code from On2 for
implementation in the videantis v-MPx programmable processor
platform. -- Since the end of the third quarter, in October, On2
announced the release of the Hantro 9190 Multi-format Hardware
Decoder. The 9190 is the tenth generation of the Hantro line of
decoders, and supports video playback up to full HD (1080p)
resolution at 60 frames per second (fps) in multiple formats,
including On2 VP6 for Adobe® Flash Player and Sun JavaFX®, DivX® 3,
4, 5, 6, H.264, H.263, Sorenson® Spark, MPEG-1, MPEG-2, MPEG-4,
VC-1/WMV9 and RealVideo® 8, 9 & 10, as well as up to 66
megapixel JPEG still images. On2 will not host a conference call in
connection with the announcement of its third quarter results in
light of the proposed merger with Google. About On2 On2 (NYSE Amex:
ONT) creates advanced video compression technologies that power the
video in today's leading desktop and mobile applications and
devices. On2 customers include Adobe, Skype, Nokia, Infineon, Sun
Microsystems, Mediatek, Sony, Brightcove, and Move Networks. On2 is
also an industry leader in server-based video transcoding software.
The On2 VP6 video format provides web and HD-quality video for
leading sites such as Hulu, Vimeo, Yahoo! Video, Dailymotion,
CCTV.com, 56.com, Tudou.com and Eurosport.com. On2 Technologies is
headquartered in Clifton Park, NY USA. For more information, visit
http://www.on2.com/. All trademarks mentioned in this document are
the property of their respective owners. Forward-Looking and
Cautionary Statements Except for historical information and
discussions contained herein, certain statements included in this
press release may constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements included in this document, other than
statements of historical fact, that address activities, events or
developments that management expects, believes or anticipates will
or may occur in the future are forward-looking statements. These
statements represent our reasonable judgment on the future based on
various factors and using numerous assumptions and are subject to
known and unknown risks, uncertainties and other factors that could
cause actual outcomes and/or our financial position to differ
materially from those contemplated by the statements. You can
identify these statements by the fact that they do not relate
strictly to historical or current facts. They use words such as
"believe," "expect," "will," "anticipate," 'should," "plans" and
other words of similar meaning. Such statements include, but are
not limited to, our statements regarding the macroeconomic
environment, that revenue is still subject to quarter-to-quarter
variability and that we continue to anticipate completing our
proposed merger with Google during the fourth quarter of 2009.
Investors should not rely on forward-looking statements because
they are subject to a variety of risks and uncertainties and other
factors that could cause actual results to differ materially from
the Company's expectation. Risks and uncertainties include, among
others: the risk that the conditions to merger set forth in the
agreement and plan of merger will not be satisfied and the
transaction will not be consummated; uncertainties as to the timing
of the merger; uncertainties as to whether holders of On2 common
stock will approve the merger proposal at the On2 special meeting;
changes in On2's business during the period between now and the
effective time of the merger that could cause a condition to
closing not to be satisfied; as well as other factors detailed in
On2's and Google's filings with the SEC, including the Proxy
Statement/Prospectus, and subsequent SEC filings. Additional
information concerning risk factors is contained from time to time
in the Company's SEC filings. The Company expressly disclaims any
obligation to update the information contained in this release.
Additional Information and Where to Find It Google has filed a
Registration Statement with the SEC in connection with the proposed
merger, which includes a preliminary Proxy Statement of On2 and
also constitutes a Prospectus of Google. The definitive Proxy
Statement/Prospectus will be mailed to On2 stockholders prior to
the On2 special meeting. The Registration Statement and the Proxy
Statement/Prospectus contain important information about Google,
On2, the proposed merger and related matters. Investors and
security holders are urged to read the Registration Statement and
the Proxy Statement/Prospectus (including all amendments and
supplements to it) carefully. Investors and security holders may
also obtain free copies of the Registration Statement and the Proxy
Statement/Prospectus and other documents filed with the SEC by
Google and On2 through the web site maintained by the SEC at
http://www.sec.gov/ and by contacting Google Investor Relations at
+1-650-253-7663 or On2 Investor Relations at +1-518-881-4299. In
addition, investors and security holders can obtain free copies of
the documents filed with the SEC on Google's website at
investor.google.com and on On2's website at http://www.on2.com/.
Participants in the Solicitation Google, On2 and their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies in respect of the proposed merger.
Information regarding Google's executive officers and directors is
included in Google's definitive proxy statement, which was filed
with the SEC on March 24, 2009, and information regarding On2's
executive officers and directors is included in On2's definitive
proxy statement, which was filed with the SEC on April 7, 2009. The
Proxy Statement/Prospectus for the proposed merger also provides
additional information about participants in the solicitation of
proxies from On2 stockholders, which participants' interests may
differ from On2 stockholders generally. You can obtain free copies
of these documents from Google or On2 using the contact information
below. On2 Technologies, Inc. Unaudited Condensed Consolidated
Statements of Operations Three months ended Nine months ended
September 30, September 30, 2009 2008 2009 2008 ---- ---- ---- ----
Revenue $5,259,000 $4,971,000 $14,271,000 $12,688,000 Operating
expenses: Cost of revenue (1) 561,000 940,000 1,579,000 3,564,000
Research and development(2) 1,560,000 2,848,000 5,445,000 8,665,000
Sales and marketing(2) 841,000 2,018,000 2,743,000 5,782,000
General and administrative(2) 1,380,000 1,946,000 5,002,000
8,640,000 Asset impairments - 26,245,000 - 26,245,000 Restructuring
expense 146,000 - 1,178,000 - Costs associated with proposed merger
1,989,000 - 2,409,000 - Litigation settlement costs - - 523,000 -
Equity-based compensation: Research and development 167,000 101,000
478,000 325,000 Sales and marketing 77,000 35,000 196,000 147,000
General and administrative 190,000 257,000 616,000 728,000 -------
------- ------- ------- Total operating expenses 6,911,000
34,390,000 20,169,000 54,096,000 --------- ---------- ----------
---------- Income (loss) from operations (1,652,000) (29,419,000)
(5,898,000) (41,408,000) Interest and other (expense) income, net
65,000 304,000 430,000 - Gain from forgiveness of debt - - 669,000
379,000 --------- ---------- ---------- ---------- Loss before
provision for income taxes (1,587,000) (29,115,000) (4,799,000)
(41,029,000) Provision for income taxes - - - - ---------
---------- ---------- ---------- Net loss $(1,587,000)$(29,115,000)
$(4,799,000) $(41,029,000) Convertible preferred stock 8% dividend
- - - - --------- ---------- ---------- ---------- Net loss
attributable to common stockholders $(1,587,000)$(29,115,000)
$(4,799,000) $(41,029,000) =========== ============ ===========
============ Basic and diluted net loss per common share $(0.01)
$(0.17) $(0.03) $(0.24) ====== ====== ====== ====== Weighted
average basic and diluted common shares outstanding 175,960,000
171,613,000 174,952,000 171,028,000 =========== ===========
=========== =========== (1) Includes equity-based compensation of
$78,000 and $53,000 for the three months ended September 30, 2009
and 2008, respectively (1) Includes equity-based compensation of
$208,000 and $215,000 for the nine months ended September 30, 2009
and 2008, respectively (2) Excludes equity-based compensation,
which is presented separately On2 Technologies, Inc. Condensed
Consolidated Balance Sheets September 30, December 31, ASSETS 2009
2008 ------------- ------------ (unaudited) Current assets: Cash
and cash equivalents $2,070,000 $4,157,000 Short-term investments
131,000 132,000 Accounts receivable 4,254,000 2,730,000 Prepaid
expenses and other current assets 323,000 439,000 ------- -------
Total current assets 6,778,000 7,458,000 Intangible assets, net
16,179,000 16,587,000 Property and equipment, net 952,000 1,401,000
Other assets 382,000 430,000 ------- ------- Total assets
$24,291,000 $25,876,000 =========== =========== LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable &
accrued expenses $6,319,000 $5,720,000 Accrued restructuring
expenses 898,000 - Deferred revenue 2,422,000 2,133,000 Short-term
borrowings 256,000 63,000 Note payable 508,000 - Current portion of
long-term debt 177,000 1,148,000 Capital lease obligation 263,000
260,000 ------- ------- Total current liabilities 10,843,000
9,324,000 Capital lease obligation, excluding current portion
253,000 432,000 Long-term debt 1,967,000 1,802,000 Warrant
derivative liability 153,000 - ------- - Total liabilities
13,216,000 11,558,000 Commitments and contingencies - - Total
stockholders' equity 11,075,000 14,318,000 ---------- ----------
Total liabilities and stockholders' equity $24,291,000 $25,876,000
=========== =========== DATASOURCE: On2 Technologies, Inc. CONTACT:
Investor, Garo Toomajanian of ICR, LLC , +1-518-881-4299, Web Site:
http://www.on2.com/
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