On2 Technologies, Inc. Announces Improved Third Quarter Results

On2 Technologies, Inc. Announces Improved Third Quarter Results 


NEW YORK, Oct. 28  /PRNewswire-FirstCall/ -- On2 Technologies, Inc. today
announced that its revenue for the third quarter of 2003 was $866,000 compared
to third quarter 2002 revenue of $824,000. Operating expenses for the third
quarter were $1,467,000, a reduction of 30% from operating expenses for the
third quarter of 2002. The net loss for the third quarter of 2003 was $625,000
compared to the net loss of $1,281,000 for the third quarter of 2002.  The net
loss attributable to common stockholders for the third quarter of 2003 was
$853,000 ($.01 per share), compared to $1,949,000($.03 per share) for the third
quarter of 2002.

For the nine months ended September 30, 2003, revenue rose 17% over the first
nine months of 2002 to $2,976,000, while operating expenses were reduced by 42%
to $4,300,000. The net loss for the first nine months of 2003 was $1,312,000
compared to the net loss of $4,952,000 for the first nine months of 2002.  The
net loss attributable to common stockholders for the first nine months of 2003
was $1,540,000 ($.02 per share) compared to $5,620,000 ($.11 per share) for the
first nine months of 2002.

A reconciliation of Net Loss (GAAP) to EBITDA for Q3 and the nine months of 2003
compared to the comparable periods last year is as follows:

                           Three Months Ended           Nine Months Ended
                              September 30                September 30
                         2003              2002         2003          2002

  Net loss (GAAP)    $(625,000)      $(1,281,000) $ (1,312,000) $(4,952,000)

  Interest and other
   (income) expense,
    net                 21,000             4,000       (21,000)      14,000

  Taxes                  3,000             9,000         9,000       27,000

  Depreciation &
   Amortization        196,000           400,000       672,000    1,214,000
  EBITDA loss        $(405,000)        $(868,000)    $(652,000) $(3,697,000)




At September 30, 2003, the Company's cash and cash equivalents was $2,915,000
compared to cash and cash equivalents of $1,012,000 at June 30, 2003 and
$553,000 at December 31, 2002.

The company also said that Chinese officials have invited On2 representatives to
the launch announcement of China's EVD standard.  The event is expected to occur
on November 18th in Beijing.  Representatives of Beijing E-World and On2's CEO
Douglas McIntyre and other management members are planning to attend the event.

The company will host a conference call and a live webcast regarding its third
quarter results at 5:00 p.m. EST on October 28:

  To access the live webcast, please use the following:
  http://www.vcall.com/CEPage.asp?ID=84893

  The dial-in information for the conference call is as follows:

  Live Participant Dial In (Toll Free): 877-407-9205

  Replay Number (Toll Free): 877-660-6853
  Replay Passcodes (both required for playback):
  Account #: 1628
  Confirmation #: 79870
  Teleconference Replay Available Until: October 29, 2003 at 11:59PM Eastern



The earnings release and related financial information to be discussed during
the conference call will be available on the company's website at:
http://www.on2.com/releases.

About On2 Technologies, The Duck Corporation

On2 Technologies (AMEX:ONT) is a leading technology firm at the forefront of
video compression. The Company revolutionized video encoding with the creation
of its advanced full-motion, full-screen, video compression and streaming
technology (TrueMotion(R) VP4/VP5/VP6). On2 licenses its high quality video
codecs for use in set-top boxes, consumer electronics devices and wireless
applications. In addition, On2 offers a suite of products and services,
including high-level video encoding, customized technical support, and
consulting/integration services. Located in New York City, the Company has an
office in Clifton Park, NY, and operations in Cambridge, UK. On2 may be reached
at 21 Corporate Drive, Suite 103, Clifton Park, NY 12065 or  or .

This release contains statements that constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, including statements relating to an
event relating to the EVD standard. These forward-looking statements are subject
to the safe harbor provisions of the aforementioned Sections and the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
potential risks and uncertainties including those described in our filings with
the SEC, and that the actual results or developments may differ materially from
those in the forward-looking statements as a result of various factors.
Potential risks and uncertainties include, but are not limited to, general
economic conditions, competition in the compression technology industry and the
company's history of operating losses. We have based these forward-looking
statements on information currently available and disclaim any intention or
obligation to update or revise any forward-looking statement.

                            On2 Technologies, Inc.
                    Consolidated Statements of Operations

                            Three months ended        Nine months ended
                               September 30,            September 30,
                             2003        2002         2003         2002
                         (unaudited)  (unaudited)  (unaudited)  (unaudited)

  Revenues                  $866,000     $824,000   $2,976,000   $2,540,000

  Operating expenses (a):
    Cost of revenues         410,000      422,000    1,252,000    1,630,000
    Research and
     development             249,000      455,000      865,000    1,847,000
    Sales and marketing      158,000      108,000      350,000      848,000
    General and
     administrative          650,000      605,000    1,833,000    2,515,000
    Impairment charges          --           --           --         30,000
    Cost curtailment and
     restructuring
     charges (b)                --        502,000         --        581,000

      Total operating
       expenses            1,467,000    2,092,000    4,300,000    7,451,000

      Loss from
       operations           (601,000)  (1,268,000)  (1,324,000)  (4,911,000)

  Interest and other
   income (expense), net     (21,000)      (4,000)      21,000      (14,000)

      Loss before
       provision for
       income taxes         (622,000)  (1,272,000)  (1,303,000)  (4,925,000)

  Provision for income
   taxes                       3,000        9,000        9,000       27,000

      Net loss              (625,000)  (1,281,000)  (1,312,000)  (4,952,000)

  Non-cash convertible
   preferred stock
   dividend                  228,000      668,000      228,000      668,000

      Net loss
       attributable to
       common
       stockholders        $(853,000) $(1,949,000) $(1,540,000) $(5,620,000)

  Basic and diluted net
   loss per common share      $(0.01)      $(0.03)      $(0.02)      $(0.11)

  Weighted average basic
   and diluted
  common shares
   outstanding            65,339,000   56,094,000   62,678,000   51,321,000


  (a)   Operating expenses include depreciation of fixed assets and
  amortization of intangible assets that amount to the following in the
  aggregate:
          -- $400,000 for the three months ended September 30, 2002
          -- $196,000 for the three months ended September 30, 2003
          -- $1,214,000 for the nine months ended September 30, 2002
          -- $672,000 for the nine months ended September 30, 2003

  (b)   Restructuring and cost curtailment charges consist of property-lease
  termination, relocation costs, severance and the loss on disposal of fixed
  assets
          associated with the relocation, that amount to the following in
          the aggregate.
          -- $502,000 for the three months ended September 30, 2002
          -- $581,000 for the nine months ended September 30, 2002


                           On2 Technologies, Inc.
                    Condensed Consolidated Balance Sheets


                                       September 30, 2003       December 31,
             ASSETS                           (unaudited)              2002

  Current assets:
    Cash and cash equivalents                 $2,915,000          $553,000
    Accounts receivable, net                     961,000           601,000
    Prepaid expenses and other current
     assets                                      222,000           101,000

      Total current assets                     4,098,000         1,255,000

  Property and equipment, net                    174,000           353,000
  Intangible assets, net                            --             463,000
  Other assets                                    26,000             9,000

      Total assets                            $4,298,000        $2,080,000

  LIABILITIES AND STOCKHOLDERS EQUITY

  Current liabilities:
    Accounts payable and accrued
     expenses                                   $348,000          $520,000
    Deferred revenue                              53,000              --
    Term-loan payable                            108,000              --
    Current portion of capital lease
     obligations                                    --               4,000

      Total current liabilities                  509,000           524,000

  Capital lease obligations, net of
   current portion                                  --               5,000
  Convertible debentures, net of
   discount                                      541,000           569,000

  Commitments and contingencies

  Stockholders' equity                         3,248,000           982,000

      Total liabilities and
       stockholders' equity                   $4,298,000        $2,080,000


DATASOURCE: On2 Technologies, Inc.



CONTACT: Tim Reusing of On2 Technologies, [phone], or

[phone]



Web site:  http://www.on2.com/ 

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