On2 Technologies Restructures19 Aug, 2002 By: Hive News
The board of On2 Technologies, Inc., has approved a new round of funding and a management and cost restructuring intended to substantially improve the beleagured company's financial situation.
Existing shareholders and members of the company's board have committed expected funding in excess of $600,000, expected to close within the next week. The company will issue a four-year convertible debenture with interest paid in kind.
On2 executives believe the funding amount will be adequate to cover costs until it begins to collect receivables that will be billed for work and software delivered in the third calendar quarter of the year. This funding is contingent upon execution of definitive documentation and successful closing.
The company does not intend to make further use of the Crossover financing facility, a spokesperson said.
The company will relocate most of its facilities and operations to its Albany Technical Center to cut costs but it will not reduce its engineering staff in Albany. The company will take a to-be-determined restructuring charge in the third quarter.
The company further disclosed that its chairman, Strauss Zelnick, its CEO Douglas McIntyre, and its CFO Mark Meagher will work without salaries from Aug. 15 to the year-end. These salaries are not being deferred and will not be accrued.
"I hope that investors appreciate that management is making a sacrifice in the hundreds of thousands of dollars because we believe in our products and employees,” McIntyre said. “VP5 continues to be the world's most powerful video codec and we get more evidence of that from our customers every day. If this company was worth $25 million in the spring, I believe it is worth much more now.”
The company stated that it believes that its operating costs per month will drop by Sept. 1 to approximately $200,000 a month from the current rate of $400,000 a month.
"Our total cash operating costs for Q4 (excluding non-cash amortization and depreciation) should be roughly $600,000," said Meagher.
"The company can now continue its fine relationships with its customers, who have given us a great deal of support over the last week. We can spend our time building software, shipping product, supporting customers and collecting money. Our development staff in Albany is unaffected by this move," said McIntyre. "By dropping the cash costs for G&A and cutting our office facilities dramatically, we move to an expense run rate which would have allowed us to be profitable two of the last three quarters.”