UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
AND EXCHANGE ACT OF 1934
July
23, 2009
DATE
OF REPORT
(DATE
OF EARLIEST EVENT REPORTED)
On2
Technologies, Inc.
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
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1-15117
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84-1280679
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(STATE
OR OTHER JURISDICTION
OF
INCORPORATION)
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(COMMISSION
FILE NO.)
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(IRS
EMPLOYER
IDENTIFICATION
NO.)
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3
Corporate Drive, Suite 100, Clifton Park, NY 12065
(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(518)
348-0099
(REGISTRANT’S
TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT
APPLICABLE
(FORMER
NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01 Entry into a Material Definitive Agreement.
The
information set forth under Item 2.03 of this report is incorporated by
reference in this Item 1.01.
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On July
23, 2009, On2 Technologies, Inc. (the “Company”) entered into a Release and
Settlement Agreement (the “Settlement Agreement”) with Islandia, L.P.
(“Islandia”) to settle a lawsuit filed in August 2008 by Islandia against the
Company in connection with the Company’s October 2004 issuance of Series D
Convertible Preferred Stock pursuant to which the Company sold to Islandia 1,500
shares of Series D Convertible Preferred Stock. As previously
reported by the Company, Islandia alleged, among other things, that the Company
failed to make monthly redemptions of and failed to pay certain dividends on the
Series D Convertible Preferred Stock and sought damages of approximately $4.6
million plus interest and reasonable attorneys’ fees. As of March 31,
2009, the end of the Company’s first quarter in fiscal year 2009, the Company
did not record any provision associated with this lawsuit.
Pursuant
to the Settlement Agreement, the Company issued a convertible note to Islandia
in the principal amount of $500,000 which bears an interest rate equal to eight
percent (8%) per annum paid semiannually in arrears (the “Note”). The
Note may be redeemed by the Company at any time and will become due and payable
on July 23, 2010 or earlier upon a change of control. A “change of
control” is defined under the Note as (i) the acquisition, by a person, entity
or group (other than the present stockholders of the Company or any of such
stockholders’ subsidiaries or affiliates) of beneficial ownership, directly or
indirectly, of securities representing 30% or more of the total voting power
represented by the Company’s then outstanding voting securities; (ii) the
consummation of the sale or disposition by the Company of all or substantially
all of its assets; or (iii) the consummation of a merger or consolidation of the
Company with any other entity resulting in the voting securities of the Company
outstanding immediately prior thereto representing less than 70% of the total
voting power of the entity surviving such merger or consolidation.
At the
time of payment, the Note shall be payable in cash or shares of the Company’s
common stock, par value $0.01 per share (the “Common Stock”) at the sole
discretion of the Company, subject to certain conditions. If the Company opts to
pay the Note in Common Stock, the conversion price will be calculated by
dividing (i) the principal amount plus accrued and unpaid interest outstanding
under the Note by (ii) a price per share equal to 85% of the average of the 20
trading day daily volume weighted average price of the Common Stock at the time
of conversion ending one trading day prior to the date of payment.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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On2
Technologies, Inc.
(REGISTRANT)
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By:
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/s/
Matthew Frost
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Matthew
Frost
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Interim
Chief Executive Officer and
Chief
Operating Officer
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Dated:
July 29, 2009