On2 Expects Q4 Revenue Growth of 75% Over Q3 2001 and 125% Over Q4 2000; Operating Expenses Expected to Be Consistent with Q3 2001.

Business & High-Tech Editors

NEW YORK--(BUSINESS WIRE)--Jan. 10, 2002

On2 Technologies Inc., The Duck Corporation (AMEX: ONT), the industry leader in compression technology, announced today that it expected its revenue for the fourth quarter of 2001 to increase at least 75% over the $495,000 of revenue in the third quarter of 2001. This would be the Company's largest revenue quarter since its inception. Operating expenses are expected to be consistent with the previous quarter, thus, sharply improving the Company's loss per share.

The Company also expects full year revenue for 2001 to be more than double the $1 million of revenue in full year 2000.

The Company attributed its growth in the second half of the year to the increased number of clients utilizing its VP4 video compression technology in set-top boxes. VP4 was ported to Equator Technologies' MAP-CA digital signal processor and is currently being used to power Video-On-Demand initiatives in Japan and Korea. Additionally, the Company has ported VP4 onto Texas Instruments' fully programmable C6000 DSP, thereby creating processor options for potential clients. As set-top box and consumer device deployment increases throughout 2002, the recurring licensing fees have the potential to generate significant revenues for the Company.

Fiscal year 2001 also saw the addition of several products that will enable On2 to further serve clients. The Company's Audio for Video Codec (AVC) works seamlessly with its VP line of video codecs to provide a full-service solution, and the recently released TrueCast 7.0 is the first server software from On2 to conform to the RTSP/RTP standard.

"Streaming video over the Internet no longer seems to have a promising near-term future, but video delivered to devices that connect broadband to the television is a business that is growing rapidly in Asia and we believe these devices should find their way to North America and Europe later this year," said Douglas A. McIntyre, President and Chief Executive Officer.

In an effort to help create a common, freely available video compression standard, On2 made its recent-generation VP3 codec available to the open-source community in September. Since then, the number of people and companies who have registered to download the VP3 source code has exceeded 10,000. Downloads accelerated late in the fourth quarter, after Intel's website recognized VP3 as the potential video counterpart to MP3.

The company also plans to build on its base of important customers like MCS/SGI Japan/NEC, Equator Technologies, RealNetworks, QB, K.K, and Texas Instruments.

"Broadband penetration in the U.S. rose from 11% of Internet users at the end of 2000, to 20% at the end of 2001, and there are over 21 million high speed unique users according to Nielsen," added McIntyre. "Broadband is becoming a mass medium, and is continuing to grow rapidly which puts us in a position to move what we have deployed in Asia to the U.S."

Year 2002

The Company's goal in 2002 is to keep quarterly expenses relatively consistent with those incurred in the second half of 2001.

The company has already hit a couple of important technology milestones in the first week of the new year, including the release of On2's VP4i codec for real-time encoding and support of television based interlaced content. In the first few months of 2002, the company expects to release a new version of TrueCast 7, with multiple bandwidth capacity and Linux support, as well as the new VP5 codec.

The company also stated that its goal was to continue the rapid revenue growth rate the company had the second half of 2001.

"Demand for our products remains strong in Q1, and we expect to add new DSP and platform integration clients in the fairly short term," continued McIntyre. "We continue to focus on only two goals: 1) being broadly accepted as the most powerful, efficient codec in the world, and 2) having the company be consistently profitable. Anything less would be considered a failure by our management."

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) VP3/VP4). On2 licenses its high quality video codecs for use in set-top boxes, electronic gaming devices and wireless applications. In addition, On2 offers a suite of products and services, including high-level video encoding, hosting, streaming, customized technical support, and consulting services. Headquartered in New York City, the Company has an office in Albany, NY, and operations in London, UK, and Seoul, Korea. On2 may be reached at 145 Hudson Street, New York, NY 10013, telephone [phone] or [e-mail]. Investor inquiries should be sent to [e-mail].

This release, together with any oral comments related hereto, 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 and are subject to the safe harbor provisions of those 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 risk 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. 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.