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As filed with the Securities and Exchange Commission on December 8, 2000
Registration No. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ON2.COM INC.
(Exact name of Registrant as specified in its charter)
Delaware 84-1280679
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
375 Greenwich Street
New York, New York 10013
(212) 941-2400
(Address, including zip code and telephone number,
including area code, of registrant's
principal executive offices)
----------------------
Douglas A. McIntyre
President and Chief Executive Officer
On2.com Inc.
375 Greenwich Street
New York, New York 10013
(212) 941-2400
(Name, address, including zip code and telephone number,
including area code, of agent for service)
----------------------
COPY TO:
William A. Newman, Esq.
McGuireWoods LLP
9 West 57th Street
Suite 1620
New York, New York 10019
(212) 548-2100
----------------------
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time as soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. /_/
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
----------------------- ------------------- ----------------- ---------
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED SHARE(1) AGGREGATE OFFERING REGISTRATION FEE
--------------------------- ----------------------- -------- ------------------- ----------------
PRICE(1)
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 5,459,000 $ 1.13 $ 6,168,670.00 $ 1,629.00
per share underlying the
Common Stock Purchase Agreement
Common Stock, par value $0.01 2,974,366 (2) 1.13 3,361,034 887.00
per share, underlying
convertible Preferred Stock
Common Stock, par value $0.01 1,089,640 (2) 1.13 1,231,293 325.00
per share, underlying Warrants
Common Stock, par value $0.01 369,444 (2) 1.13 417,472 110.00
per share
==============================================================================================================================
Totals: 9,892,450 $ 1.13 $ 11,178,469 $ 2,951.00
</TABLE>
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(1) Estimated solely for the purpose of computing the registration fee, based on
the average of the high and low sales prices of the common stock as reported by
the American Stock Exchange on December 6, 2000 in accordance with Rule 457
under the Securities Act of 1933.
(2) Pursuant to Rule 416 under the Securities Act of 1933, the number of shares
of common stock registered hereby is subject to adjustment to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 8, 2000
9,892,450 Shares
ON2.COM INC.
Common Stock
($0.01 par value)
-------------------------------------------
Of the shares of common stock being offered by this prospectus,
4,433,450 shares are being registered for resale by the selling stockholders.
Those shares of common stock include 369,444 shares of common stock, 2,974,366
shares of common stock underlying convertible preferred stock and 1,089,640
shares of common stock underlying warrants. We will not receive any of the
proceeds from the sale of the shares by the selling stockholders. However, we
may receive proceeds from the exercise of any outstanding warrants to purchase
those shares. We will pay all expenses of registration incurred in connection
with this offering, but the selling stockholders will pay all of their selling
commissions, brokerage fees and related expenses.
The remaining 5,459,000 shares may be issued pursuant to a common stock
purchase agreement between Crossover Ventures, Inc. and us as further described
in this prospectus. We will receive the sale price of any common stock that we
sell pursuant to the common stock purchase agreement, and Crossover Ventures may
resell those shares pursuant to this prospectus.
The selling stockholders and Crossover Ventures have advised us that
they will sell the shares from time to time in the open market, on the American
Stock Exchange, in privately negotiated transactions or a combination of these
methods, at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, at negotiated prices, or otherwise as described
under "Plan of Distribution."
Crossover Ventures is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with its sale, and the selling stockholders
and any participating broker-dealers may be deemed to be "underwriters" as
defined in the Securities Act. We cannot estimate at the present time the amount
of commissions or discounts, if any, that will be paid by Crossover Ventures or
the selling stockholders on account of their sale of shares of common stock. We
will indemnify Crossover Ventures and the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act.
<PAGE>
Our common stock is traded on the American Stock Exchange under the
symbol "ONT". On December 6, 2000, the closing price of the common stock was
$1.05 per share.
-------------------------------------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 1.
-------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December , 2000.
<PAGE>
RISK FACTORS
In evaluating our business, prospective investors should carefully
consider the following risks in addition to the other information in this
prospectus or in the documents referred to in this prospectus. Any of the
following risks could have a material adverse impact on our business, operating
results and financial condition and result in a complete loss of your
investment.
WE HAVE A HISTORY OF LOSSES AND NEGATIVE CASH FLOW AND ANTICIPATE CONTINUED
LOSSES.
Since our inception, we have incurred significant losses and negative
cash flow from operations, and as of September 30, 2000, we had an accumulated
deficit of approximately $53.7 million. We have not achieved profitability, and
we expect to continue to incur operating losses for the foreseeable future as we
fund operating and capital expenditures in implementing our business plan. Our
business model assumes that consumers will be attracted to and use
broadband-specific video compression technology to access content available on
customer Web sites that will, in turn, allow us to provide our technology
solutions to customers. Our business model is not yet proven, and we cannot
assure you that we will ever achieve or sustain profitability or that our
operating losses will not increase in the future. Our business strategy may be
unsuccessful and we may not be able to adequately address all or any of these
risks. Even if we are able to achieve profitability, we may be unable to sustain
or increase our profitability. In either case, our business, financial
conditions and results of operations will be materially and adversely affected.
WE MAY NEED ADDITIONAL CASH TO OPERATE OUR BUSINESS.
We anticipate that we will require additional funding within the next
12 months to adequately finance the growth of our current operations and the
fulfillment of our strategic objectives. We may require additional financing
within this time frame to fund acquisitions, develop new technologies or acquire
strategic assets. However, there can be no assurance that we will be able to
procure additional funding on terms acceptable to us, or at all. In that event,
we could reduce the development of our products and services, scale back current
operations until funds become available to us on favorable terms and could
potentially result in a modification to the auditor's report on our December 31,
2000 financial statements. We cannot assure you that we will be able to generate
sufficient cash flow from our operations or be able to raise sufficient capital,
or at all, to enable us to operate our business.
SINCE WE RECENTLY CHANGED OUR STRATEGIC OPERATING MODEL, WE ARE ESSENTIALLY A
NEW COMPANY AND ACCORDINGLY ARE SUBJECT TO THE RISKS ASSOCIATED WITH A NEW
COMPANY.
Even though our business was founded in 1992, we have only recently
implemented our new business plan. As a result, our company is essentially a new
venture. Therefore, we do not have a significant operating history upon which
you can evaluate us and our prospects, and you should not rely upon our past
performance to predict our future performance. In transitioning to our new
business model, we are substantially changing our business operations, sales and
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implementation practices, customer service and support operations and management
focus. We also face new risks and challenges, including a lack of meaningful
historical financial data upon which to plan future budgets, competition from a
new range of sources, the need to develop strategic relationships and other
risks described below. We cannot guarantee that we will be able to transition
successfully to our new business model.
Our ability to generate profits, if any, will depend on our ability:
o to attract customers to use our technology infrastructure and
support services;
o to generate revenues from software licensing and sales, broadband
streaming services and consulting to developers of broadband
content; and
o to control costs.
WE ANTICIPATE CONTINUED SIGNIFICANT OPERATING LOSSES FOR THE FORESEEABLE FUTURE,
AND WE CANNOT ASSURE YOU THAT PROFITABILITY WILL EVER BE ATTAINED.
In light of the rapidly evolving nature of our business and its limited
operating history, we have little experience forecasting our revenues and
believe that period-to-period comparisons of financial results are not
necessarily meaningful. Therefore, you should not rely on period-to-period
comparisons of our historical financial results as an indication of our future
financial results. Moreover, our financial results may vary from period to
period due to the uncertainties of our business.
OUR STOCK PRICE IS VOLATILE.
The market for our common stock has experienced extreme price and
volume fluctuations and may continue to be volatile in response to various
factors, including:
o quarterly variations in our operating results;
o competitive announcements;
o the operating and stock price performance of other companies that
investors may deem comparable to us;
o news relating to trends in our markets; and
o changes in financial estimates by securities analysts or failure
to meet analyst estimates.
In addition, the stock market generally has experienced significant
price and volume fluctuations, and the market prices of companies in our
industry have been highly volatile. Due to the volatility of the stock market
generally, the price of our common stock could fluctuate for
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reasons beyond our control.
THE SALE OF SHARES ELIGIBLE FOR FUTURE SALE IN THE OPEN MARKET COULD DEPRESS OUR
STOCK PRICE.
Sales of significant amounts of common stock in the public market in
the future, the perception that sales will occur or the registration of shares
could materially and adversely affect the market price of our common stock or
our future ability to raise capital through an offering of our equity
securities. As of November 30, 2000, there were outstanding approximately
12,208,699 shares of our common stock that are freely tradable. As of November
30, 2000, we issued approximately 18,750,823 shares of common stock, warrants to
purchase up to 7,033,135 shares of our common stock upon exercise and 3,002,931
shares of preferred stock that are convertible under certain circumstances into
our common stock, in private transactions since June of 1999. We have granted
the holders of those securities registration rights. Therefore, these shares of
common stock, warrants and preferred stock can be sold in accordance with Rule
144 of the Securities Act or the holders thereof can exercise their registration
rights related thereto. In addition, as of November 30, 2000, there were
outstanding options to purchase approximately 6,859,000 shares of common stock
that become eligible for sale in the public market from time to time depending
on vesting. There are also 5,459,000 shares of common stock covered by this
prospectus which are issuable under the common stock purchase agreement and
under the warrants previously granted and which may be granted in the future to
Crossover Ventures. We may also issue additional shares in acquisitions and may
grant additional stock options to our employees, officers, directors and
consultants under our stock option plans.
The issuance or even the potential issuance of shares under the common
stock purchase agreement, in connection with any other additional financing, and
upon exercise of warrants, options or rights will have a dilutive impact on
other stockholders and could have a negative effect on the market price of our
common stock. In addition, the shares issuable to Crossover Ventures under the
common stock purchase agreement will be issued at a discount to the daily volume
weighted average prices of our common stock prior to the issuance to Crossover
Ventures. This will further dilute the interests of other stockholders.
As we sell shares of common stock to Crossover Ventures under the
common stock purchase agreement, and then Crossover Ventures sells the common
stock to third parties, our common stock price may decrease due to the
additional shares in the market. If we decide to draw down under the common
stock purchase agreement as the price of our common stock decreases, we will be
required to issue more shares of our common stock for any given dollar amount
invested by Crossover Ventures, subject to the minimum selling price we specify.
The more shares that are issued under the common stock purchase agreement, the
more our shares will be diluted and the more our stock price may decrease. This
may encourage short sales, which could place further downward pressure on the
price of our common stock.
WE DEPEND ON THE GROWTH OF BROADBAND INTERNET USAGE.
Our technology works primarily over "broadband" Internet connections.
The main services
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we are building require high-bandwidth access to the Internet and delivery of
data volumes that are higher than most service providers are presently
delivering. While we are striving to overcome the technical and business hurdles
inherent in establishing a network of this nature, there can be no assurance we
will be successful in obtaining the bandwidth required to provide our services,
or obtain it at economical cost.
Broadband web usage may be inhibited for a number of reasons, such as:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o availability of cost-effective, high-speed service.
Our business would be adversely affected if broadband web usage does
not continue to grow.
OUR SUCCESS DEPENDS ON OUR ABILITY TO CONTINUE TO ATTRACT, RETAIN AND MOTIVATE
HIGHLY SKILLED EMPLOYEES.
Our ability to execute our growth plan and be successful depends on our
continuing ability to attract, retain and motivate highly skilled employees. As
we continue to grow, we will need to hire additional personnel in all
operational areas. Competition for personnel throughout the Internet industry is
intense. We may be unable to retain our key employees or attract, assimilate or
retain other highly qualified employees in the future. We have from time to time
in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications. If we do not succeed in attracting new personnel or retaining
and motivating our current personnel, our business will be adversely affected.
MUCH OF OUR TECHNOLOGY RELIES ON OWNED OR LICENSED INTELLECTUAL PROPERTY, AND WE
CANNOT BE SURE THAT SUCH RIGHTS ARE PROTECTED FROM THE USE OF OTHERS, INCLUDING
POTENTIAL COMPETITORS.
We regard much of our technology as proprietary and try to protect it
by relying on trademarks, copyrights, patents, trade secret laws and
confidentiality agreements. In connection with our license agreements with third
parties, we seek to control access to and distribution of our technology,
documentation and other proprietary information. Even with all of these
precautions, it could be possible for someone else to either copy or otherwise
obtain and use our proprietary information without our authorization or to
develop similar technology independently. Effective trademark, copyright and
trade secret protection may not be available in every country in which our
services are made available through the Internet, and policing unauthorized use
of our proprietary information is difficult and expensive. We cannot be sure
that the steps we have taken will prevent misappropriation of our proprietary
information. Any misappropriation could have a material adverse effect on our
business. In the future, we may need to go to court to either enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the
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proprietary rights of others. That litigation might result in substantial costs
and diversion of resources and management attention.
We currently license from third parties technologies incorporated into
some of our products and services. As we continue to introduce new services that
incorporate new technologies, we may be required to license additional
technology from others. We cannot be sure that these third-party technology
licenses will continue to be available on commercially reasonable terms, if at
all.
OUR INDUSTRY IS HIGHLY COMPETITIVE.
The Internet industry is highly competitive and affected by rapid
change. We believe that the principal competitive factors in our business
include technological innovation, pricing, customer service, network quality,
service offerings and the flexibility to adapt to changing market conditions. In
establishing our broadband strategy, we face a number of strong, firmly
entrenched competitors who are currently providing similar services to
low-bandwidth users and high-bandwidth users. These and other companies have
announced plans to provide broadband video-based services and technology. In
addition to competition from other Internet content and technology companies,
well-established media distribution companies, particularly in the cable
television and satellite markets, have established, and continue to seek to
establish, interactive, on-demand digital services through the development of
sophisticated digital set-top technology and related back-end server systems.
Many of our existing competitors have, and some future competitors may have,
significantly greater financial and technical resources than we have.
WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE.
Our future success depends, in large part, on our ability to use
leading technologies effectively, to develop our technological expertise, to
enhance our existing services and to develop new services that meet changing
customer needs on a timely and cost-effective basis. We are unable to predict
which technological development will challenge our competitive position or the
amount of expenditures that will be required to respond to a rapidly changing
technological environment. Our failure to respond in a timely and effective
manner to new and evolving technologies could have a negative impact on our
operating results and financial condition.
INTERNET CAPACITY CONSTRAINTS MAY IMPAIR THE ABILITY OF CONSUMERS TO ACCESS OUR
WEB SITE OR OUR CUSTOMER'S WEB SITES, WHICH COULD HINDER OUR ABILITY TO GENERATE
REVENUE.
Our success will depend, in large part, upon a robust communications
industry and infrastructure for providing Internet access and carrying Internet
traffic. The Internet may ultimately not prove to be a viable commercial medium
because of:
o inadequate development of the necessary infrastructure such as a
reliable network backbone;
o failure to timely develop complementary products such as high
speed modems that will enable broadband access for individuals;
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o delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet
activity; or
o increased government regulation.
If the Internet continues to experience significant growth in the
number of users and the level of use, then the Internet infrastructure may not
be able to continue to support the demands placed on it.
WE FACE UNCERTAINTIES REGARDING GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES.
Laws and regulations specifically pertaining to the Internet are new
and developing. These laws or regulations govern matters such as online content,
intellectual property, user privacy, e-commerce, information security and
taxation. In addition, the applicability of existing laws to the Internet is
uncertain and evolving. As a result of this uncertainty, it is difficult to
predict the impact, if any, that future regulation or changes in regulation may
have on our operations.
Moreover, we may be liable to third parties for any content that we
encode, distribute or make available on our website if that content violates a
third party's intellectual property rights or violates any applicable laws, such
as obscenity laws or defamation laws. Although we try to mitigate this risk by
seeking indemnification from our customers and suppliers, we may still be
subject to liability if indemnification is not obtained, is contested or does
not provide us with enough resources to cover any potential liability.
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT POTENTIAL INVESTORS.
Some of the provisions of our certificate of incorporation, our bylaws
and Delaware law could, together or separately:
o discourage potential acquisition proposals;
o delay or prevent a change in control; and
o limit the price that investors might be willing to pay in the
future for shares of our common stock.
In particular, our board of directors is authorized to issue up to
20,000,000 shares of preferred stock (less any outstanding shares of preferred
stock) with rights and privileges that might be senior to our common stock,
without the consent of the holders of the common stock.
WE HAVE NEVER PAID DIVIDENDS.
We currently intend to retain earnings, if any, to support our growth
strategy. We do not anticipate paying dividends on our stock in the foreseeable
future.
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SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Some statements in (a) this prospectus under the caption "Risk
Factors," (b) any applicable prospectus supplement and (c) the documents
incorporated by reference into this prospectus may constitute "forward-looking
statements" within the meaning of federal securities laws. Forward-looking
statements are based on our management's beliefs, assumptions, and expectations
of our future economic performance, taking into account the information
currently available to them. These statements are not statements of historical
fact. Forward-looking statements involve risks and uncertainties that may cause
our actual results, performance or financial condition to be materially
different from the expectations of future results, performance or financial
condition we express or imply in any forward-looking statements. Some of the
important factors that could cause our actual results, performance or financial
condition to differ materially from our expectations are discussed in "Risk
Factors" and in our filings with the SEC.
When used in our documents or presentations, the words "anticipate,"
"estimate," "expect," "objective," "projection," "forecast," "goal" or similar
words are intended to identify forward-looking statements. We qualify any such
forward-looking statements entirely by these cautionary factors.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that we file at the SEC's public reference room at 450 Fifth
Street N.W., Washington, D.C. 20549 or at its regional public reference rooms in
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the operations and locations of the public reference
rooms. Our SEC filings are also available to the public from commercial document
retrieval services and at the SEC's website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference becomes part of this prospectus, and information that
we file later with the SEC will automatically update and supercede this
information. We incorporate by reference the documents listed below that we have
previously filed with the SEC:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999;
2. Current Report on Form 8-K filed with the SEC on March 2, 2000;
3. Quarterly Report on Form 10-QSB for the quarterly period ended
March 31, 2000;
4. Current Report on Form 8-K filed with the SEC on April 20, 2000;
5. Quarterly Report on Form 10-QSB for the quarterly period ended June
30, 2000;
6. Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2000; and
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7. Current Report on Form 8-K filed with the SEC on November 20, 2000.
We also incorporate by reference in this prospectus any future filings
that we may make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus. These include
periodic reports, such as annual reports on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K.
You may obtain the documents incorporated by reference as described
above. You may also request a copy of these filings, at no cost, from us by
writing or telephoning us at:
On2.com Inc.
375 Greenwich Street
New York, NY 10013
(212) 941-2400
Attention: Investor Relations
This prospectus is a part of a registration statement we filed with the
SEC. As allowed by the rules of the SEC, this prospectus does not contain all of
the information that can be found in the registration statement or in the
exhibits to the registration statement. You should read the registration
statement and its exhibits for a complete understanding of all of the
information included in the registration statement.
You should rely only on the information provided in this or that is
incorporated by reference. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. Information is accurate only as of
the date of the documents containing the information, unless the information
specifically indicates that another date applies.
This prospectus does not offer to sell or buy any shares in any
jurisdiction where it is unlawful. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front of
these documents.
THE COMPANY
We are a leading broadband application service provider specializing in
the delivery of television quality video over the Internet. We have developed
next generation proprietary video compression and Internet streaming technology,
True Motion(R) VP3, that enables full-motion, full-screen television-quality
video over the Internet. We provide a full suite of products and services that
includes high-level video encoding, hosting, and streaming, as well as interface
design, customized technical support and consulting services. We provide our
full-service broadband solutions to new and traditional media companies,
Internet enterprises and Web sites. Our executive offices are located at 375
Greenwich Street, New York, New York 10013. Our telephone number at that address
is (212) 941-2400. As used in this prospectus, the words "we," "us," "our"
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and "On2" refer to On2.com Inc., a Delaware corporation, and its wholly owned
subsidiaries.
RECENT DEVELOPMENTS
On November 17, 2000, our stockholders voted at a special meeting to
increase the authorized number of shares of common stock from 50,000,000 to
100,000,000 in order to give us the needed flexibility in our corporate planning
and in responding to developments in our business, including possible financing
and acquisition transactions, stock splits or other general corporate purposes.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by
the selling stockholders. However, we may receive proceeds from the exercise of
the warrants and up to $23,000,000 (subject to an increase to $40,000,000 based
on price and volume criteria) upon the issuance of common stock pursuant to the
terms of the common stock purchase agreement between Crossover Ventures and us.
Those proceeds, if any, will be used for general corporate purposes. General
corporate purposes may include expenses for research and development associated
with the development and enhancement of our technology and products, expenses
for sales and marketing and general administrative expenses associated with
salaries and other expenses. General corporate purposes may also include
acquisitions or other capital expenditures. We may invest the net proceeds
temporarily until we use them for their stated purpose.
COMMON STOCK PURCHASE AGREEMENT
OVERVIEW.
We entered into a common stock purchase agreement with Crossover
Ventures, dated December 1, 2000, for the sale, from time to time, of shares of
our common stock. Pursuant to the terms of the common stock purchase agreement,
the investor, Crossover Ventures, has committed up to $23,000,000 to purchase
shares of our common stock over a 36 month period. Crossover Ventures may be
required to commit an additional $17,000,000 for the purchase of our common
stock pursuant to the common stock purchase agreement, if after one year:
o the average daily market price of our common stock during any 10
consecutive trading days exceeds $10, and
o the average trading volume of our common stock during any 20
consecutive trading days, which includes the relevant 10 trading days
above, equals or exceeds 100,000 shares.
Once every 25 trading days, we may request a draw up to a maximum
amount based on a formula of the weighted average common stock price and the
average trading volume of our common stock. Each draw down must be at least
$100,000. At the end of each of two 10 consecutive day trading periods following
the draw down request, we and Crossover Ventures will determine, based upon the
volume-weighted average stock price during each of these 10 day periods, the
following with respect to a separate settlement for each 10 trading day period:
o the actual draw down amount for each period,
o the number of shares of our common stock that we will issue to
Crossover Ventures at the end of each 10 day period, and
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o the price per share paid by Crossover Ventures.
Crossover Ventures will receive a six percent (6%) discount to the
average daily market price of our common stock if the average market price for
the relevant 10 trading day period is equal to or greater than $2.43. It will
receive a ten percent (10%) discount to the average daily market price of our
common stock if the average market price for the relevant 10 trading day period
is less than $2.43. We will receive the amount of the draw down less an escrow
agent fee of $750 if Crossover Ventures chooses to use an escrow agent.
We have issued to Crossover Ventures stock purchase warrants to
purchase 50,000 shares of our common stock with an exercise price of $1.52. The
warrants are exercisable beginning on June 1, 2001 and will expire on June 1,
2004. The common stock issuable upon exercise of those warrants is included in
the registration statement of which this prospectus is a part.
We may not issue more than 19.99% of our outstanding common stock to
Crossover Ventures pursuant to the common stock purchase agreement and the
warrant delivered to Crossover Ventures without obtaining stockholder approval.
In addition, the common stock purchase agreement does not permit us to draw down
funds if the issuance of shares of common stock to Crossover Ventures pursuant
to the draw down would result in Crossover Ventures or its affiliates owning
more than 9.9% of our outstanding common stock on the date we exercise a draw
down.
THE DRAW DOWN PROCEDURE.
We may request a draw down by faxing a draw down notice to Crossover
Ventures, setting forth:
o the amount of the draw down
o the minimum threshold price, if any, at which we are willing to
sell the shares of our common stock, and
o the date the pricing period begins.
The first 10 trading days from the date which the pricing period begins
will be used to determine the number of shares of our common stock we will issue
to Crossover Ventures on the first settlement with respect to that draw down.
The second 10 trading day period will be used to determine the number of shares
to be issued on the second settlement with respect to that same drawn down.
AMOUNT OF THE DRAW.
The amount of the draw down is the amount we request, except that the
maximum amount we may request is limited by the following formula:
o 4.5% of the weighted average price, as reported by Bloomberg
Financial, of our common stock for the thirty day period ending
on the date the pricing period begins
11
<PAGE>
multiplied by
o the total trading volume of our common stock for the three month
period ending on the date the pricing period begins.
If the volume-weighted average daily price for any given trading day is
below the threshold price set by us in the draw down notice during the 20
trading days immediately following the date we give notice, then the draw down
amount that Crossover Ventures is obligated to pay is correspondingly reduced by
1/20th for each day that is below the threshold price. Thus, if the daily price
for a day is below the threshold price we will not issue any shares of our
common stock and Crossover Ventures will not purchase any shares of common stock
for that day. In addition, if the trading of our common stock is suspended for
more than three hours on any trading day or if the registration statement
covering the common stock is not effective, then the amount of the draw down
shall be reduced by 1/20th and Crossover Ventures will not purchase any shares
of our common stock for that day.
SPECIAL ACTIVITY DRAW DOWN.
If we expect to incur a one time charge for any reason, including an
acquisition, we may notify Crossover Ventures of that special activity 21 days
in advance, and we will be able to issue a draw down notice to Crossover
Ventures every 22 days instead of every 25 days for a 10 week period. In
connection with a special activity draw down, Crossover Ventures shall receive
an additional three percent (3%) discount to the average daily market price of
our common stock.
NECESSARY CONDITIONS BEFORE CROSSOVER VENTURES IS OBLIGATED TO PURCHASE OUR
COMMON STOCK.
The following conditions must be satisfied before Crossover Ventures is
obligated to purchase shares of our common stock:
o A registration statement for the shares of common stock we will
be issuing must be declared effective by the SEC and must remain
effective and available as of the draw down settlement date for
making resales of the shares of common stock purchased by
Crossover Ventures.
o No event has occurred that has a material adverse effect on our
business, operations, properties or financial conditions;
o Trading in our shares of common stock must not have been
suspended by the SEC or the national exchange on which our shares
are listed, nor shall minimum prices have been established on
securities whose trades are reported by the national exchange on
which our shares are listed; and
12
<PAGE>
o Other conditions set forth in the common stock purchase
agreement.
TERMINATION OF THE COMMON STOCK PURCHASE AGREEMENT.
Crossover Ventures may terminate the equity draw down facility under
the common stock purchase agreement if any of the following events occur:
o We suffer a material adverse change in our business, operations,
properties, or financial condition;
o Our shares of common stock are delisted from the American Stock
Exchange unless such delisting is in connection with the listing
of those shares of common stock on the New York Stock Exchange,
the NASDAQ National Market or the NASDAQ SmallCap Market; or
o We file for protection from creditors.
LIMITATIONS ON CONSOLIDATION, MERGER AND FUTURE FINANCING.
We may not merge or consolidate with any other entity, unless that
entity assumes the obligations under the common stock purchase agreement. We
have also agreed not to enter into any other standby equity-based credit
facility during the term of the common stock purchase agreement.
INDEMNIFICATION OF CROSSOVER VENTURES.
Crossover Ventures is entitled to customary indemnification from us for
any losses or liabilities suffered by it based upon material misstatements or
omissions from the registration statement and the prospectus, except as they
relate to information supplied by Crossover Ventures to us for inclusion in the
registration statement and prospectus.
13
<PAGE>
SELLING STOCKHOLDERS
The following sets forth the transactions pursuant to which the selling
stockholders may be registering shares of common stock, shares of common stock
issuable upon conversion of convertible preferred stock or shares of common
stock issuable upon the exercise of warrants:
o Pursuant to the Agreement and Plan of Merger, dated June 9, 1999, by
and among Applied Capital Funding, Inc. (the predecessor to the
Company), Applied Capital Acquisition Inc. and The Duck Corporation
(the "Merger Agreement"), we agreed, subject to the conditions set
forth therein, to register approximately 15,000,000 shares of our
common stock, 400,000 shares of our common stock underlying the Series
A Preferred Stock issued pursuant to the Merger Agreement and shares
of our common stock underlying 5,897,143 warrants issued pursuant to
the Merger Agreement.
o On December 30, 1999, we issued 821,460 shares of our common stock and
warrants to acquire 246,379 shares of our common stock in a private
placement of securities. We also entered into nine Investor Rights
Agreements, each dated December 1, 1999 and substantially similar to
each other, with the owners of such shares and warrants pursuant to
which we granted registration rights for those shares and the shares
underlying the warrants. In connection with the private placement of
securities, we also entered into a Securityholders Agreement on
December 1, 1999 with some of our existing stockholders to restrict
the sale of 10,018,000 shares of our common stock held by them and we
agreed to give those stockholders registration rights in connection
with those shares of our common stock.
o On September 27, 1999, we issued 171,244 shares of our common stock
and warrants to purchase 2,500 shares of our common stock in a private
placement in exchange for all of the outstanding stock of MetaVisual
Creations Limited, and we agreed to give registration rights for the
common stock to the former stockholders of MetaVisual Creations
Limited.
o On September 29, 2000, we issued 924,527 shares of our Series C-II
Preferred Stock and warrants to purchase 396,037 shares of our common
stock in a private placement of securities to three purchasers, and we
agreed to register, under certain circumstances, the shares underlying
such preferred stock and warrants.
o On December 1, 2000, we entered into a common stock purchase agreement
with Crossover Ventures, and we issued to Crossover Ventures, Inc. a
warrant to purchase 50,000 shares of our common stock. We further
agreed to register the common stock underlying that warrant.
o On December 8, we issued 2,049,839 shares of our Series C-III
Preferred Stock and warrants to purchase 635,450 shares of our common
stock in a private placement of securities to two purchasers, and we
agreed to register, under certain circumstances, the shares underlying
such preferred stock and warrants.
14
<PAGE>
Except as noted below, the selling stockholders are not affiliates of
us and have not had any position, office or other material relationship with us
within the past three years, except as stockholders. All of the shares of common
stock that have been or may be acquired by the selling stockholders upon the
issuance of stock, upon the conversion of preferred stock or upon exercise of
the warrants are being registered and offered pursuant to the registration
statement of which this prospectus forms a part.
Crossover Ventures is a Cayman Islands corporation engaged in the
business of investing in publicly traded equity securities for its own account.
Crossover Venture's principal offices are located in Georgetown, Grand Cayman
Islands. The directors of Crossover Ventures have the authority to exercise any
warrants granted to Crossover Ventures and to sell and vote the shares of common
stock issued under the common stock purchase agreement.
Other than the 50,000 warrants we granted to Crossover Ventures in
connection with closing the common stock purchase agreement, Crossover Ventures
does not currently own any of our securities. Other than its obligation to
purchase shares of common stock under the common stock purchase agreement, it
has no other commitments or arrangements to purchase or sell any of securities.
There are no business relationships between Crossover Ventures and us other than
under the common stock purchase agreement.
The following table is based on 27,684,171 shares of common stock
outstanding as of November 30, 2000.
15
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF OF COMMON STOCK NUMBER OF NUMBER
SHARES OF BENEFICIALLY SHARES OF OF SHARES
COMMON STOCK OWNED BEFORE NUMBER OF COMMON OF COMMON
NAME OF SELLING STOCKHOLDER BENEFICIALLY OFFERING-INDIRECT SHARES OF STOCK STOCK
OWNED BEFORE COMMON UNDERLYING UNDERLYING
OFFERING-DIRECT STOCK WARRANTS PREFERRED
OFFERED OFFERED STOCK
OFFERED
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bernadette Borromeo-Charles 5,047 1,165
Claude Charles 30,280 6,988
Simon Conway-Smith 4,599 4,599
Corral Capital Limited 494,339 116,981 377,358
Crossover Ventures, Inc. (1) 50,000 50,000
Mr. Y.M. Fok 1,430,833 338,594 1,092,239
Emily Harrow 895,547 200,000
Ms. T.A. Norris 8,472 8,472
Paul Wilkins (2) 140,276 16,097 156,373
Verus International Group Limited (3) 1,476,908 349,497 1,127,411
Winton Capital Holdings Ltd. 799,052 226,415 377,358
TOTALS 5,335,353 16,097 369,444 1,089,640 2,974,366
<CAPTION>
AMOUNT OF PERCENT OF
SHARES OF COMMON STOCK
COMMON STOCK BENEFICIALLY
NAME OF SELLING STOCKHOLDER OWNED AFTER OWNED AFTER
OFFERING OFFERING
------------------------------------------------------------------
<S>
Bernadette Borromeo-Charles 3,882 *
Claude Charles 23,292 *
Simon Conway-Smith -0- -0-
Corral Capital Limited -0- -0-
Crossover Ventures, Inc. (2) -0- -0-
Mr. Y.M. Fok -0- -0-
Emily Harrow 695,547 2.5%
Ms. T.A. Norris -0- -0-
Paul Wilkins (1) -0- -0-
Verus International Group Limited -0- -0-
Winton Capital Holdings Ltd. 195,279 *
TOTALS 918,000 2.5%
</TABLE>
-----------------------
* Less than one percent.
1. This number is indeterminable. As set forth under the section entitled
"Common Stock Purchase Agreement", Crossover Ventures has agreed to purchase
from the Company up to $40,000,000 of common stock of the Company, subject to
certain price and volume limitations.
2. Mr. Paul Wilkins is an employee of the Company and has been since September
of 1999, when the Company acquired MetaVisual Creations Limited ("MetaVisual").
Mr. Wilkins was a shareholder of MetaVisual prior to the acquisition and
acquired his shares in the Company as a result of the acquisition. In addition,
Mr. Wilkins and his wife are trustees of the Paul Gordon Wilkins 1999 Children's
Settlement, which holds 16,097 shares of common stock of the Company.
3. Ajmal Khan, a former director of the Company, is a principal of Verus
International Group Limited.
PLAN OF DISTRIBUTION
SELLING SHAREHOLDERS.
The selling stockholders have advised us that they may offer common
stock at various times in one or more transactions on the American Stock
Exchange, in private offerings, exchange distributions, secondary distributions,
negotiated transactions or any combination of the foregoing. They may sell at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices, which may be
changed. We will not receive
16
<PAGE>
any part of the proceeds of sales of shares made hereunder by the selling
stockholders. We may, however, receive proceeds from the exercise of outstanding
warrants to purchase such shares, and from the sale of our common stock to
Crossover Ventures.
The selling stockholders may also use broker-dealers to sell their
shares. In connection with any sales, the selling stockholders and any brokers
or dealers participating in such sales may be deemed to be underwriters within
the meaning of the Securities Act. Any broker-dealer participating in such
transactions as agent may receive commissions from the selling stockholders or
purchasers of the shares offered hereby (and, if they act as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the selling stockholders and Crossover Ventures.
The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such
broker-dealers, and any profits received on the resale of such shares, may be
deemed to be underwriting discounts and commissions under the Securities Act if
any such broker-dealers purchase shares as principals. We have agreed to
indemnify the selling stockholders and Crossover Ventures against certain
liabilities, including liabilities under the Securities Act.
We are responsible for all costs, expenses and fees incurred in
registering the securities offered hereby, except for any brokerage commissions
payable by the selling stockholders. There can be no assurance that the selling
stockholders will sell any or all of the shares of common stock offered by them
hereunder.
COMMON STOCK PURCHASE AGREEMENT.
Crossover Ventures may offer for sale up to 5,509,000 shares of our
common stock under this prospectus which they will originally acquire under the
terms of the common stock purchase agreement and the warrants we issued to them
as more fully described under "Common Stock Purchase Agreement." Crossover
Ventures will offer the shares for their own account. We do not know for certain
how or when Crossover Ventures will choose to sell their shares of common stock.
We will not receive any proceeds from Crossover Ventures' sale of shares of
common stock, but we will receive proceeds from our sale of common stock to
Crossover Ventures.
To permit Crossover Ventures to resell the shares of common stock
issued to them, we agreed to file a registration statement and all necessary
amendments and supplements with the SEC for the purpose of registering and
maintaining the registration of the shares. We will bear all costs relating to
the registration of the common stock offered by the prospectus.
Crossover Ventures will offer our common stock into the public market
from time to time using this prospectus, although there can be no assurance that
they will in fact sell any or all of the securities covered by this prospectus.
The sales may be made on the American Stock Exchange, on the over-the-counter
market or otherwise at prices related to the then current market price, or in
17
<PAGE>
negotiated private transactions, or in a combination of these methods. Crossover
Ventures will act independently of us in making decisions with respect to the
form, timing, manner and size of each sale. Crossover Ventures has informed us
that there are no existing arrangements between them and any other stockholder,
broker, dealer, underwriter or agent relating to the sale or distribution of
shares of common stock which they may sell through this prospectus.
The share of common stock may be sold in one or more of the following manners:
o block trades in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell
a portion of the block as principal to facilitate the
transaction;
o purchases by a broker or dealer for its account under this
prospectus; or
o ordinary brokerage transactions and transactions in which the
broker solicits purchases.
Crossover Ventures will pay all commissions and their own expenses, if
any, associated with the sale of the shares of common stock. Crossover Ventures
will sell shares without paying any underwriting discounts or commissions,
except for usual and customary selling commissions paid to brokers or dealers.
However, in effecting sales, brokers or dealers engaged by Crossover Ventures
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions, discounts or other concessions from Crossover Ventures in
amounts to be negotiated immediately prior to the sale. The compensation to a
particular broker-dealer may be in excess of customary commissions. Profits on
any resale of the shares of common stock as a principal by these broker-dealers
and any commissions received by these broker-dealers may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Any
broker-dealer participating in these transactions as agent may receive
commissions from Crossover Ventures and from the purchaser of the shares of
common stock if the broker-dealer acts as agent for the purchaser.
Broker-dealers may agree with Crossover Ventures to sell a specified
number of shares of common stock at a stipulated price per share and, to the
extent a broker-dealer is unable to do so acting as agent for Crossover
Ventures, to purchase as principal any unsold shares of common stock at a price
required to fulfill the broker-dealer commitment to Crossover Ventures.
Broker-dealers who acquire shares of common stock as principal may thereafter
resell the shares of common stock from time to time in transactions, which may
involve crosses and block transactions and which may involve sales to and
through and other broker-dealers, including transactions of the nature described
above, on the American Stock Exchange, in the over-the-counter market, in
negotiated transactions or otherwise at market prices prevailing at the time of
sale or at negotiated prices, and in connection with the resales may pay to or
receive from the purchasers of the shares of common stock commissions computed
as described above. Brokers or dealers who acquire shares of common stock as
principal and any other participating brokers or dealers may be deemed to be
underwriters in connection with resales of the shares of common stock.
Crossover Ventures is deemed a statutory underwriter within the meaning
of Section 2(11)
18
<PAGE>
of the Securities Act of 1933 with respect to any shares it sells. Crossover
Ventures has agreed to be named as a statutory underwriter and will be acting as
an underwriter in its resales of the shares of common stock under this
prospectus. Because Crossover Ventures is deemed a statutory underwriter, the
discounts and concessions it receives upon purchases of our common stock, and
any profits it receives on the resale of the shares, will be deemed to be
underwriting discounts and commissions under the Securities Act. Each time
Crossover Ventures purchases shares of our common stock under the common stock
purchase agreement, it will receive a substantial discount to then current
market price of our common stock. The price at which we will issue shares of
common stock to Crossover Ventures will be six percent (6%) below the daily
volume weighted average prices of the common stock on the American Stock
Exchange if the average market price of our common stock for the relevant 10
trading day period is equal to or greater than $2.43. If the average market
price of our common stock for the relevant 10 trading day period is less than
$2.43, we will issue shares of common stock to Crossover Ventures at a ten
percent (10%) discount to the average daily market price of our common stock. In
connection with the common stock purchase agreement, we granted 50,000 warrants
to Crossover Ventures, which are exercisable for $1.52 per share of common stock
beginning on June 1, 2001 and expiring on June 1, 2004. The warrants granted to
Crossover Ventures will also be deemed to be underwriting commission under the
Securities Act. We estimate that the fair market value of the 50,000 warrants
using customary pricing models is $33,545. Lastly, at the closing under the
common stock purchase agreement on December 1, 2000, we paid $25,000 to
Crossover Ventures to cover legal and administrative expenses in connection
with negotiating the common stock purchase agreement.
Crossover Ventures is also subject to applicable state and federal
securities laws, rules and regulations, including Rule 10b-5 and Regulation M
under the Exchange Act of 1934, and the rules and regulations of the Nasdaq
National Market. Under these rules, Crossover Ventures may not:
(1) engage in market making activities at the same time as they are
engaged in a distribution of the shares of common stock for a
period beginning when this person becomes a distribution
participant and ending upon this person's completion of
participation in a distribution;
(2) engage in any stabilization activity in connection with our
securities;
(3) impose penalty bids or effect passive market making bids; and
(4) bid for or purchase any of our common stock or attempt to induce
any person to purchase any of our common stock other than as
permitted under the Exchange Act.
In addition, if Crossover Ventures is an "affiliated purchaser" as
defined in Regulation M, they must coordinate their sales under this prospectus
with each other and with us for purposes of Regulation M as required by
Securities Exchange Act Release 34-38067 (December 20, 1996). Crossover Ventures
and any of its controlling persons, have not been an officer, director or
otherwise an affiliate of our company during the last three years. In addition
to the rules and regulations applicable to it, Crossover Ventures has also
agreed not to engage in any short sales of our common stock during the term of
the common stock purchase agreement. These restrictions, and the other rules and
regulations applicable to Crossover Ventures, may affect the marketability of
the shares of common stock.
19
<PAGE>
We granted registration rights to Crossover Ventures to enable it to
sell the common stock it purchases under the common stock purchase agreement. We
will assume no obligation or responsibility whatsoever to determine a method of
disposition for the shares.
We may file one or more post-effective amendments to the registration
statement of which this prospectus is a part to describe any material change to
the information in this prospectus, including with respect to the plan of
distribution, for as long as Crossover Ventures holds shares of our stock or
until the shares can be sold under an appropriate exemption from registration.
This obligation may include, to the extent required under the Securities Act of
1933, that a supplemental prospectus be filed, disclosing:
o the name of any broker-dealers;
o the number of shares of common stock involved;
o the price at which the shares of common stock are to be sold;
o the commissions paid or discounts or concessions allowed to
broker-dealers, where applicable;
o that broker-dealers did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus, as supplemented; and
o any other facts material to the transaction.
LEGAL MATTERS
The validity of the common stock offered pursuant to this prospectus
will be passed upon for us by McGuireWoods LLP, New York, New York. William A.
Newman, a director of On2.com, Inc., is a partner of McGuireWoods LLP.
EXPERTS
The audited financial statements incorporated by reference in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
20
<PAGE>
-----------------
TABLE OF CONTENTS
-----------------
Page
----
RISK FACTORS.................................................................1
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS.................7
WHERE YOU CAN FIND MORE INFORMATION..........................................7
THE COMPANY..................................................................8
RECENT DEVELOPMENTS..........................................................9
USE OF PROCEEDS.............................................................10
COMMON STOCK PURCHASE AGREEMENT.............................................10
SELLING STOCKHOLDERS........................................................14
PLAN OF DISTRIBUTION........................................................16
LEGAL MATTERS...............................................................20
EXPERTS.....................................................................20
<PAGE>
9,892,450 SHARES
ON2.COM INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
December , 2000
<PAGE>
ON2.COM INC.
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
------
Item 14 Other Expenses of Issuance and Distribution.
The following table sets forth costs and expenses of the sale and
distribution of the securities being registered. All amounts except SEC fees are
estimates.
SEC registration fee $ 2,951.00
Legal fees and expenses 20,000.00
Accounting fees and expenses 3,000.00
Financial printers fees and expenses 3,500.00
Miscellaneous expenses 1,049.00
Total $ 30,500.00
Item 15 Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") allows
for the indemnification of officers, directors, and other corporate agents in
terms sufficiently broad to indemnify such persons under certain circumstances
for liabilities (including reimbursement for expenses incurred) arising under
the Securities Act. Article XII of the Registrant's amended and restated
certificate of incorporation and Article IX of the Registrant's bylaws authorize
indemnification of the Registrant's directors, officers, employees and other
agents to the extent and under the circumstances permitted by the DGCL. The
Registrant maintains liability insurance for the benefit of its directors and
certain of its officers.
The above discussion of the DGCL and of the Registrant's amended and
restated certificate of incorporation, bylaws and indemnification agreements is
not intended to be exhaustive and is qualified in its entirety by such statutes,
amended and restated certificate of incorporation, bylaws and indemnification
agreements.
II-1
<PAGE>
Item 16. Exhibits.
Exhibit
Number
------
1.1 Common Stock Purchase Agreement
4.1 Registration Rights Agreement between Crossover Ventures, Inc.
and On2.com Inc.
4.2 Warrant Agreement between Crossover Ventures, Inc. and On2.com
Inc.
5.1 Opinion of McGuireWoods LLP.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
23.2 Consent of McGuireWoods LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
Item 17 Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(a) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b), if in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the
II-2
<PAGE>
effective registration statement.
(c) to include any material information with respect to the
plan of distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that the undertakings set forth in paragraphs (a) and (b)
above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of our counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, when applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective. For the purpose of
determining any liability under the Securities Act,
II-3
<PAGE>
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of New York, state of New York, on December 8, 2000.
Each person whose signature appears below hereby appoints Douglas A. McIntyre as
such person's true and lawful attorney, with full power for him to sign, for
such person and in such person's name and capacity indicated below, any and all
amendments to this registration statement, hereby ratifying and confirming such
person's signature as it may be signed by said attorney to any and all
amendments.
ON2.COM INC.
By: /s/ Douglas A. McIntyre
-------------------------------------
Douglas A. McIntyre
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Douglas A. McIntyre
--------------------------- President, Chief Executive Officer
(Douglas A. McIntyre) and Director December 8, 2000
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Daniel B. Miller
--------------------------- Founder, Chief Technology Officer
(Daniel B. Miller) and Director December 8, 2000
/s/ Mark J. Meagher
--------------------------- Chief Financial Officer December 8, 2000
(Mark J. Meagher)
/s/ Douglas Song
--------------------------- Senior Vice President Finance and
(Douglas Song) Corporate Development December 8, 2000
/s/ Stephen D. Klein
---------------------------
(Stephen D. Klein) Director December 8, 2000
/s/ William A. Newman Director December 8, 2000
---------------------------
(William A. Newman)
/s/ Jack L. Rivkin Director December 8, 2000
---------------------------
(Jack L. Rivkin)
/s/ Strauss Zelnick Director December 8, 2000
---------------------------
(Strauss Zelnick)
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
1.1 Common Stock Purchase Agreement
4.1 Registration Rights Agreement between Crossover Ventures, Inc. and
On2.com Inc.
4.2 Warrant Agreement between Crossover Ventures, Inc. and On2.com Inc.
5.1 Opinion of McGuireWoods LLP.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of McGuireWoods LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page).
