ON2 (AMEX:ONT)
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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/