CLIFTON PARK, N.Y., Aug. 6 /PRNewswire-FirstCall/ -- On2
Technologies, Inc. (NYSE Amex: ONT), a leader in video compression
solutions, today announced quarterly results for the period ending
June 30, 2009. Revenue in the second quarter of 2009 was $5.0
million, an increase of 53% from the second quarter of 2008, and an
increase of 24% from the prior quarter. On a GAAP basis, second
quarter net loss was ($224,000), or ($0.00) per share, compared to
a net loss of ($7.2) million, or ($0.04), in the second quarter of
2008. GAAP net loss includes non-recurring expenses for the second
quarter of $420,000 in legal and other fees incurred in the second
quarter of 2009 related to the previously announced merger
agreement with Google and $523,000 in litigation settlement costs.
Matt Frost, Chief Operating Officer and interim Chief Executive
Officer of On2 Technologies said, "We are very pleased to have
delivered our strongest revenue performance in six quarters. While
we have felt some impact of the global economic recession, the
continual growth of video on the Internet coupled with the growing
need for content providers to reduce bandwidth and improve quality
continues to drive our business forward. We were encouraged to see
a strong performance from our On2 Finland operation, particularly
after it underwent significant cost-reducing measures earlier in
the year. Excluding non-recurring expenses, we produced our first
quarter of non-GAAP net income and non-GAAP break-even net income
per share in over three years. As our top-line patterns are likely
to remain somewhat variable, there is no guarantee that positive
earnings trends will continue into the next quarter. We believe,
however, that encouraging longer term trends are being established
through a combination of revenue growth and effective cost
management." Frost added, "Non-recurring items in the second
quarter included $523,000 in costs to settle a complaint filed by
Islandia LP in August 2008. We also incurred non-recurring legal
and other costs of $420,000 associated with our proposed merger
with a subsidiary of Google. On the positive side, we recognized a
gain from forgiveness of debt this quarter of $669,000 from a loan
owed to the Finnish government." Second Quarter Business Highlights
-- Royalties of $1.2 million in the second quarter increased 74%
year-over-year and 5% sequentially. Royalties represented 24% of
revenue in the quarter, compared with 21% of revenue in the second
quarter of 2008 and 28% of revenue in the first quarter of 2009. --
In the second quarter of 2009, On2 added 40 new customers,
excluding online sales, with 13 transactions in the quarter that
contributed over $50,000 each to revenue. While the number of new
customers decreased year-over-year and sequentially, the number of
transactions over $50,000 is up over the same periods. -- In April,
On2 announced that Westec Interactive, a provider of innovative,
intelligent video surveillance systems, will integrate the On2
VP7(TM) format into its digital video recorder to increase the
quality of stored video while delivering a substantial savings in
bandwidth. -- In April, On2 and Boo-Ree Multimedia, a fabless
semiconductor company that designs, develops and markets multimedia
systems-on-chips, announced On2 Video playback on the Boo-Ree
Tachyon-I multimedia processor with high-performance hardware
playback of On2 VP6 and VP7, and other formats. -- Also in April,
On2 announced its fastest hardware codec design ever, the
Hantro(TM) 9170. The design supports video playback up to full HD
(1080p) resolution at 60 frames per second in multiple formats
including MPEG-1, MPEG-2, MPEG-4, Sorenson Spark(R), H.263, H.264,
VC-1 and REALVIDEO(R) 8, 9 & 10. On2 also completed a
successful Beta test of and announced the availability of its Flix
Cloud on-demand video transcoding service. -- In April, On2
announced that ASUS, a leading provider of digital home solutions
and Internet devices, has licensed the On2 VP7 format and
encoder/decoder software SDK to develop Skype-enabled videophones.
-- In May, On2 announced that it had licensed VP6 encoding
technology to Verismo Networks for use in its VuNow Internet TV
platform, and that Chinese web portal NetEase would be deploying
On2's VP6 technology. -- In June, On2 announced that Mobixell
Networks, a provider of multimedia and advertising solutions to
mobile operators and content providers, had licensed the VP6 Codec
SDK for use in Mobixell's mobile multimedia processing and
optimization platform. Google Acquisition As announced yesterday,
On2 entered into a definitive agreement to be acquired by Google.
Under the terms of the agreement, each outstanding share of On2
common stock will be converted into $0.60 worth of Google class A
common stock in a stock-for-stock transaction. The transaction is
valued at approximately $106.5 million. The transaction, which is
subject to On2 stockholder approval, regulatory clearances and
other closing conditions, is expected to close in the fourth
quarter of 2009. Conference Call Management will hold a conference
call to discuss its results for the second quarter of 2009 and the
Google acquisition announcement at 5:00pm ET on August 6, 2009. To
access the live webcast, visit:
http://www.investorcalendar.com/IC/CEPage.asp?ID=148129. If you
prefer to dial-in to the call, the information is as follows: Live
Call: (877) 407-9210, domestic (201) 689-8049, international
Replay: (877) 660-6853 (201) 612-7415 Replay Passcodes: Account #:
286 Conference ID #: 329419 The telephonic replay will be available
until August 13, 2009. 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 our actual results and 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
"expect," "will," "anticipate," "should," "plans" and other words
of similar meaning. Such statements include, but are not limited
to, statements regarding the proposed acquisition of On2 by Google
and our belief relating to encouraging longer term trends being
established through a combination of revenue growth and effective
cost management. 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. 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.
Non-GAAP Financial Measures On2 has provided in this release
financial information that has not been prepared in accordance with
GAAP. This information includes non-GAAP net income (loss) and
non-GAAP net income (loss) per share and GAAP operating expenses
excluding costs associated with proposed merger and litigation
settlement costs. This non-GAAP information is provided to enhance
the reader's overall understanding of the Company's current
financial performance and prospects for the future. Specifically,
On2 believes that the exclusion of non-recurring expenses provides
useful comparative data by reflecting On2's business operations in
a manner that is consistent with expected future operations.
Management has historically used non-GAAP net loss and non-GAAP net
loss per share when evaluating operating performance because we
believe the exclusion of the items described above provides an
additional measure of our core operating results and facilitates
comparisons of our core operating performance against prior periods
and our business model objectives. The presentation of this
additional information should not be considered in isolation or as
a substitute for results prepared in accordance with accounting
principles generally accepted in the United States. In the
financial tables of our earnings press release, On2 has included
for the relevant periods reconciliations of GAAP net loss and GAAP
net loss per share to non-GAAP net income (loss) and non-GAAP net
income (loss) per share and GAAP operating expenses excluding costs
associated with proposed merger costs and litigation settlement
costs. On2 Technologies, Inc. Condensed Consolidated Balance Sheets
December 31, ASSETS June 30, 2009 2008 (unaudited) Current assets:
Cash and cash equivalents $2,666,000 $4,157,000 Short-term
investments 131,000 132,000 Accounts receivable 2,199,000 2,730,000
Prepaid expenses and other current assets 290,000 439,000 Total
current assets 5,286,000 7,458,000 Intangible assets, net
15,872,000 16,587,000 Property and equipment, net 1,072,000
1,401,000 Other assets 402,000 430,000 Total assets $22,632,000
$25,876,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable & accrued expenses $5,526,000
$5,720,000 Accrued restructuring expenses 785,000 - Deferred
revenue 1,484,000 2,133,000 Short-term borrowings 190,000 63,000
Current portion of long-term debt 171,000 1,148,000 Capital lease
obligation 254,000 260,000 Total current liabilities 8,410,000
9,324,000 Capital lease obligation, excluding current portion
311,000 432,000 Long-term debt 1,979,000 1,802,000 Warrant
derivative liability 139,000 - Total liabilities 10,839,000
11,558,000 Commitments and contingencies - - Total stockholders'
equity 11,793,000 14,318,000 Total liabilities and stockholders'
equity $22,632,000 $25,876,000 On2 Technologies, Inc. Unaudited
Condensed Consolidated Statements of Operations Three months ended
June 30, 2009 2008 Revenue $4,996,000 $3,265,000 Operating
expenses: Cost of revenue (1) 445,000 1,194,000 Research and
development (2) 1,721,000 3,009,000 Sales and marketing (2) 926,000
1,875,000 General and administrative (2) 1,548,000 3,926,000 Costs
associated with proposed merger 420,000 - Litigation settlement
costs 523,000 - Equity-based compensation: Research and development
173,000 105,000 Sales and marketing 70,000 74,000 General and
administrative 194,000 258,000 Total operating expenses 6,020,000
10,441,000 Income (loss) from operations (1,024,000) (7,176,000)
Interest and other (expense) income, net 131,000 1,000 Gain from
forgiveness of debt 669,000 - Loss before provision for income
taxes (224,000) (7,175,000) Provision for income taxes - - Net loss
$(224,000) $(7,175,000) Convertible preferred stock 8% dividend - -
Net loss attributable to common stockholders $(224,000)
$(7,175,000) Basic and diluted net loss per common share $(0.00)
$(0.04) Weighted average basic and diluted common shares
outstanding 175,507,000 170,971,000 (1) Includes equity-based
compensation of $59,000 and $79,000 for the three months ended June
30, 2009 and 2008, respectively (2) Excludes equity-based
compensation, which is presented separately On2 Technologies, Inc.
Unaudited Reconciliation of Non-GAAP Adjustments Three months ended
June 30, 2009 2008 Operating Expenses: GAAP Operating expenses:
$6,020,000 $10,441,000 Costs associated with proposed merger
420,000 - Litigation settlement costs 523,000 Operating expenses,
excluding costs associated with proposed merger and litigation
settlement costs $5,077,000 $10,441,000 Net Income (Loss): GAAP net
loss $(224,000) $(7,175,000) Costs associated with proposed merger
420,000 - Litigation settlement costs 523,000 Net income(loss),
excluding costs associated with proposed merger and litigation
settlement costs $719,000 $(7,175,000) GAAP Net loss per share
$(0.00) $(0.04) Net income(loss) per share, excluding costs
associated with proposed merger and litigation settlement costs
$0.00 $(0.04) Three months ended March 31, 2009 2008 Net Loss: GAAP
net loss $(2,988,000) $(4,739,000) Restructuring and impairment
charge 1,032,000 - Net loss, excluding restructuring and impairment
charge $(1,956,000) $(4,739,000) DATASOURCE: On2 Technologies, Inc.
CONTACT: Investors, Garo Toomajanian, ICR, LLC, +1-518-881-4299,
Web Site: http://www.on2.com/
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