UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934


                 For the quarterly period ended March 31, 2004.

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

                  For the transition period from ____ to ____.

Commission file number 1-15117.

                             ON2 TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                        84-1280679
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
   incorporation or organization)

21 Corporate Drive, Suite 103, Clifton Park, New York                     12065
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)


                                 (518) 348-0099
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)


--------------------------------------------------------------------------------
         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.    |X|  Yes    |_|  No

--------------------------------------------------------------------------------
                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

--------------------------------------------------------------------------------
         Indicate by check mark whether the  registrant  has filed all documents
and reports  required to be filed by  Sections12,  13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. |_| Yes |_| No


                                      -1-
<PAGE>


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:

The number of shares of the Registrant's  Common Stock, par value $0.01 ("Common
Stock"), outstanding as of May 12, 2004 was 76,586,147.

Transitional Small Business Disclosure Format (Check one):  |_| Yes     |X| No


                                      -2-
<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION

                                                                                                               Page
Item 1.  Consolidated Financial Statements.

<S>                                                                                                           <C>
Condensed Consolidated Balance Sheets at March 31, 2004 (unaudited) and December 31, 2003......................  4
Unaudited Condensed Consolidated Statements of Operations,
  Three Months Ended March 31, 2004 and 2003...................................................................  5
Unaudited Condensed Consolidated Statements of Cash Flows
  Three Months Ended March 31, 2004 and 2003...................................................................  6
Notes to Unaudited Condensed Consolidated Financial Statements.................................................  8

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations................. 11

Item 3.  Controls and Procedures............................................................................... 19

PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings..................................................................................... 19

Item 6.  Exhibits and Reports on Form 8-K...................................................................... 20

Signatures..................................................................................................... 21

Certifications................................................................................................. 22
</TABLE>


                                      -3-
<PAGE>


                         PART I -- FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                             ON2 TECHNOLOGIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 March 31,       December 31,
                                                                                   2004              2003
                                                                               -------------     -------------
                                                                                (unaudited)
<S>                                                                            <C>               <C>
                                 ASSETS
Current assets:

  Cash and cash equivalents ...............................................    $   2,668,000     $   2,963,000
  Marketable equity securities ............................................           89,000
  Accounts receivable .....................................................          808,000           826,000
  Prepaid and other current assets ........................................          120,000           164,000
                                                                               -------------     -------------
     Total current assets .................................................        3,685,000         3,953,000

Property and equipment, net ...............................................          139,000           149,000
Other assets ..............................................................           28,000            26,000
                                                                               -------------     -------------
     Total assets .........................................................    $   3,852,000     $   4,128,000
                                                                               =============     =============

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Accounts payable ........................................................    $      86,000     $     119,000
  Accrued expenses ........................................................          173,000           221,000
  Deferred revenue ........................................................          427,000            30,000
  Term-loan ...............................................................            5,000            63,000
                                                                               -------------     -------------
     Total current liabilities ............................................          691,000           433,000

Convertible debentures ....................................................          413,000           409,000
                                                                               -------------     -------------

      Total liabilities

Commitments and contingencies .............................................        1,104,000           842,000

Stockholders' equity:

  Preferred stock .........................................................           56,000            56,000
  Common stock ............................................................          753,000           741,000
  Additional paid-in capital ..............................................      111,139,000       110,229,000

  Accumulated other comprehensive loss ....................................            5,000           (18,000)
   Deferred compensation ..................................................         (760,000)
  Accumulated deficit .....................................................     (108,445,000)     (107,722,000)
                                                                               -------------     -------------
    Total stockholders' equity ............................................        2,748,000         3,286,000
                                                                               -------------     -------------
    Total liabilities and stockholders' equity ............................    $   3,852,000     $   4,128,000
                                                                               =============     =============
</TABLE>


      See accompanying notes to condensed consolidated financial statements


                                      -4-
<PAGE>



                             ON2 TECHNOLOGIES, INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                Three Months Ended March 31,
                                                                               -------------------------------
                                                                                    2004              2003
                                                                               -------------     -------------
<S>                                                                            <C>               <C>
Revenue ...................................................................    $     594,000     $   1,283,000

Operating expenses:

     Cost of revenue ......................................................          342,000           404,000
     Research and development .............................................          250,000           325,000
     Sales and marketing ..................................................          113,000            85,000
     General and administrative ...........................................          538,000           621,000
                                                                               -------------     -------------
Total operating expenses ..................................................        1,243,000         1,435,000
                                                                               -------------     -------------
Loss from operations ......................................................         (649,000)         (152,000)

Interest and other expense, net ...........................................          (73,000)          (15,000)
                                                                               -------------     -------------
Loss before provision for income taxes ....................................         (722,000)         (167,000)

Provision for income taxes ................................................            1,000             2,000
                                                                               -------------     -------------
Net loss ..................................................................    $    (723,000)    $    (169,000)
                                                                               =============     =============
Basic and diluted net loss per common share ...............................    $       (0.01)    $       (0.00)
                                                                               =============     =============
Weighted average basic and diluted common
  shares outstanding ......................................................       74,619,000        59,608,000
                                                                               =============     =============
</TABLE>


      See accompanying notes to condensed consolidated financial statements


                                      -5-
<PAGE>


                             ON2 TECHNOLOGIES, INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                Three Months Ended March 31,
                                                                              --------------------------------
                                                                                   2004              2003
                                                                               -------------     -------------
<S>                                                                            <C>               <C>
Cash flows from operating activities:

  Net loss ................................................................    $    (723,000)    $    (169,000)

    Adjustments to reconcile net loss to net cash used in
      operating activities:
     Equity based compensation ............................................           95,000             7,000
     Dividends paid in common stock .......................................
     Depreciation and amortization ........................................           27,000           250,000
     Amortization of debt discount ........................................            4,000             6,000
     Unrealized loss on marketable equity securities ......................           61,000                --

   Changes in operating assets and liabilities:
     Accounts receivable, net .............................................          279,000          (662,000)
     Prepaid and other current assets .....................................           44,000           (22,000)
     Other assets .........................................................           (2,000)               --
     Accounts payable and accrued expenses ................................          (81,000)          (49,000)
     Deferred revenue .....................................................          (14,000)            3,000

Net cash used in operating activities .....................................         (310,000)         (636,000)
                                                                               -------------     -------------

Cash flows from investing activities:

  Purchases of property and equipment .....................................          (17,000)           (3,000)
                                                                               -------------     -------------
Net cash used in investing activities .....................................          (17,000)           (3,000)
                                                                               =============     =============

Cash flows from financing activities:

  Principal payments on capital lease obligations .........................                             (1,000)
  Principal payments on term-loan .........................................          (58,000)
  Proceeds from the sale of common stock ..................................                            600,000
  Purchase of common stock warrants .......................................                            (42,000)
  Proceeds from exercise of common stock options and warrants .............           67,000            13,000
                                                                               -------------     -------------
Net cash provided by financing activities .................................            9,000           570,000
                                                                               -------------     -------------
Net change in cash and cash equivalents ...................................         (318,000)          (69,000)

Effect of exchange rate changes on cash and cash equivalents ..............           23,000            (1,000)

Cash and cash equivalents, beginning of period ............................        2,963,000           553,000
                                                                               -------------     -------------
Cash and cash equivalents, end of period ..................................    $   2,668,000     $     483,000
                                                                               =============     =============
</TABLE>


                                      -6-
<PAGE>



                             ON2 TECHNOLOGIES, INC.
      UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


<TABLE>
<CAPTION>
SUPPLEMENTAL  DISCLOSURE  OF CASH FLOW  INFORMATION  AND NON-CASH  INVESTING AND FINANCING ACTIVITIES:

                                                                                Three Months Ended March 31,
                                                                               ------------------------------
                                                                                    2004             2003
                                                                               -------------    -------------
Cash paid during the period for:

<S>                                                                            <C>              <C>
   Interest ...............................................................    $       1,000    $       2,000
                                                                               =============    =============
   Taxes ..................................................................    $       1,000    $       2,000


                                                                               =============    =============
 Marketable equity securities received for accounts receivable ............    $     150,000

 Unearned Compensation from the issuance of restricted common stock .......    $     854,000

 Deferred revenue not collected ...........................................    $     411,000
</TABLE>

      See accompanying notes to condensed consolidated financial statements


<PAGE>


                             ON2 TECHNOLOGIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1)   Description of On2 Technologies, Inc.

      On2  Technologies,  Inc.  ("On2"  or the  "Company")  is a  leading  video
compression   technology   firm.  The  Company  has  developed  its  proprietary
technology  platform and video  compression/decompression  software ("codec") to
deliver  high-quality  video at the  lowest  possible  data  rates to intra- and
internets, such as set-top boxes, the Internet and wireless devices. The Company
offers  a suite  of  products  and  professional  services  that  encompass  its
proprietary compression technology. The Company's professional service offerings
include  customized  engineering  and consulting  services and high-level  video
encoding.  In addition,  the Company licenses its software products for use with
video delivery platforms.

      The Company's business is characterized by rapid technological change, new
product development and evolving industry  standards.  Inherent in the Company's
business  model are  various  risks and  uncertainties,  including  its  limited
operating  history,  unproven  business  model and the  limited  history  of the
industry in which it operates.  The Company's  success may depend, in part, upon
the wide adoption of video  delivery  mediums,  prospective  product and service
development efforts, and the acceptance of the Company's technology solutions by
the marketplace.

(2)   Basis of Presentation

      The unaudited  condensed  consolidated  financial  statements  include the
accounts of the  Company  and its  wholly-owned  subsidiaries.  All  significant
intercompany balances and transactions have been eliminated in consolidation.

      The interim  condensed  consolidated  financial  statements are unaudited.
However, in the opinion of management, the interim data include all adjustments,
consisting  only  of  normal,  recurring  adjustments,   necessary  for  a  fair
presentation of the consolidated  results for the interim periods. The condensed
consolidated financial statements included herein have been prepared pursuant to
the rules and  regulations of the Securities  and Exchange  Commission  ("SEC").
Certain information and footnote  disclosures  normally included in consolidated
financial statements prepared in accordance with accounting principals generally
accepted in the United States of America have been condensed or omitted pursuant
to such  rules  and  regulations.  The  Company  believes  that the  disclosures
included herein are adequate to make the  information  presented not misleading.
These condensed  consolidated financial statements should be read in conjunction
with the annual financial statements and notes thereto included in the Company's
Form 10-KSB Report filed with the SEC on March 30, 2004.

(3)   Stock-Based Compensation

      Statement of Financial  Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based  Compensation" encourages the use of the fair value based method
of accounting for stock-based employee compensation.  Alternatively, SFAS No.123
allows  entities to continue to apply the intrinsic  value method  prescribed by
Accounting  Principles Board ("APB") Opinion 25, "Accounting for Stock Issued to
Employees", and related interpretations and provide pro forma disclosures of net
income (loss) and earnings  (loss) per share,  as if the fair value based method
of accounting  had been applied to employee  awards.  The Company has elected to
continue to apply the  provisions of APB Opinion 25 and provide the  disclosures
required  by  SFAS  No.  123 and  SFAS  No.  148,  "Accounting  for  Stock-Based


                                      -8-
<PAGE>


Compensation - Transition and Disclosure".  The following table  illustrates the
effect on net income and  earnings  per share if the fair value based method had
been applied to all awards.

<TABLE>
<CAPTION>
                                                                    Three months ended, March 31,
                                                                    ----------------------------
                                                                        2004            2003
                                                                    -----------     -----------
<S>                                                                 <C>             <C>
      Reported net loss attributable to common stockholders         $  (723,000)    $  (169,000)
      Stock-based employee compensation determined under
      the fair value-based method                                      (201,000)       (153,000)
                                                                    -----------     -----------
      Pro forma net loss                                            $  (924,000)    $  (322,000)
                                                                    ===========     ===========
      Loss per common share (basic and diluted):
          As reported                                                 $   (0.01)      $   (0.00)
                                                                      =========       =========
          Pro forma                                                   $   (0.01)      $   (0.01)
                                                                      =========       =========
</TABLE>

      During the three months ended March 31, 2004 the Company  granted  890,000
shares of  restricted  common stock to its  employees and directors as incentive
compensation.  The stock vests on  December  1, 2004 and the total  compensation
expense of $854,000 will be amortized over the nine-month  vesting  period.  The
company recorded compensation expense of $95,000 for the quarter ended March 31,
2004.

(4)   Marketable Equity Securities

      During the three months ended March 31, 2004 the Company  received 469,000
shares of a  customer's  publicly  traded  common  stock with a market  value of
$150,000 in payment of an outstanding  account receivable pursuant to a December
2003 license  agreement.  The market value on March 31, 2004 declined to $89,000
and the Company recorded an expense for $61,000 as unrealized loss on marketable
equity  securities.  The Company's chief executive  officer became a director of
this company.

(5)   Beijing E-world

      In June  2003 On2  entered  into two  source  code  license  and  software
distribution  agreements with Beijing E-World  Technology Co., Ltd  ("E-world").
The two separate license arrangements granted E-World rights to use On2's source
code in its video disk (EVD) and high definition  television (HDTV) products and
in its non-EVD/HDTV products.

      The EVD/HDTV  agreement  provides that E-World will pay On2 $50,000 within
10 days of the  effective  date of the agreement  and also  establishes  royalty
rates for each unit manufactured.  The arrangement  provides that,  beginning in
the first calendar  quarter of 2004 and  continuing  through the last quarter of
2005, E-world will pay On2 certain minimum amounts based on anticipated  numbers
of units to be manufactured  in the relevant  quarters (with excess actual units
manufactured  in 2004 reducing the subsequent  year's minimum  obligation).  The
total two-year  minimum  royalty value due to On2 is  approximately  $4,900,000.
Nonrefundable payments for royalties,  including minimum royalties,  are payable
quarterly, beginning with the quarter ending March 31, 2004.

      The non-EVD/HDTV  arrangement  provides that E-World will pay On2 $250,000
within 10 days of the effective date of the agreement,  $400,000 upon completion
of the Initial Port (porting of the Encoder and Decoder to the Chips by E-World)
and $350,000 within 6 months of completion of the Initial Port. The non-EVD/HDTV
license arrangement also provides that,  beginning in the first calendar quarter


                                      -9-
<PAGE>


of 2004 and  continuing  through the last quarter of 2005,  E-world will pay On2
certain minimum amounts based on anticipated numbers of units to be manufactured
in the relevant quarters (with excess actual units manufactured in 2004 reducing
the subsequent  year's minimum  obligation).  The total two-year minimum royalty
value  to  On2  for  the  non-EVD  HDTV  license  is   approximately   $100,000.
Nonrefundable payments for royalties,  including minimum royalties,  are payable
quarterly beginning with the quarter ending March 31, 2004.

      The initial payments aggregating $300,000 were received in June 2003.

      Beyond the licensing of the software,  On2 will provide E-World with phone
and email source code porting,  optimization and integration  technical  support
for a period of 24 months at no additional charge.  E-World can elect to receive
an  additional 12 months of technical  support for an  additional  $37,500 under
each of the two arrangements.

      The Company did not  recognize as revenue  $411,000  from minimum  royalty
payments  for the quarter  ended  March 31,  2004 that it believes  are due from
E-World under the license agreements, because E-world has not yet paid this sum.
On2 has begun an arbitration  proceeding in London  against  E-world as provided
for in the license  agreements.  The Company has consulted with attorneys in New
York and Beijing  and  believes  that it is likely  that it will  prevail in the
arbitration,  and  that  any  judgment  in the  arbitration  proceeding  will be
enforceable  in  China,  which  is a  signatory  to the New York  Convention  on
enforcement of foreign arbitration awards.  However,  the Company has decided to
defer revenue recognition for the March 31, 2004 quarterly minimum royalties. In
addition,  the Company also believes that the $750,000  source code fees are due
and payable because E-World has not made reasonable best efforts to complete the
Initial Port as provided for under the contract.

      Under its  agreements  with E-World,  as amended  during the quarter ended
December 31, 2003,  On2 has agreed to pay to E-world a portion of royalties that
the Company receives from sales to other customers in China. Cost of revenue for
the quarter ended March 31, 2004 includes $47,000 paid to E-World.

(6)   Customer concentration

      For the three months ended March 31, 2004,  four  customers  accounted for
25%,  23%, 21% and 12% of  revenues.  For the three months ended March 31, 2003,
three customers accounted for 47%, 26% and 19% of the revenues.


                                      -10-
<PAGE>


ITEM  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

      This document  contains  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.  These  statements  relate to future  events or our future
financial  performance and are not statements of historical fact. In some cases,
you can  identify  forward-looking  statements  by  terminology  such as  "may,"
"will,"  "should,"   "expect,"  "plan,"   "anticipate,"   "assume,   ""believe,"
"estimate,"   "predict,"   "potential,"   "objective,"   "forecast,"  "goal"  or
"continue,"  the negative of such terms,  their  cognates,  or other  comparable
terminology. These statements are only predictions, and actual events or results
may differ  materially.  Although we believe that the expectations  reflected in
the  forward-looking  statements  are  reasonable,  we cannot  guarantee  future
results, levels of activity, performance or achievements, and in all cases, such
statements are subject to the Company's ability to secure  additional  financing
or to  increase  revenues  to support its  operations.  We believe  that we have
sufficient  funds and will generate  sufficient  funds to finance our operations
for the next 12 months.  There is no assurance that additional funds will not be
required to support our operations.  In this regard, the business and operations
of the Company are subject to  substantial  risks that increase the  uncertainty
inherent in the  forward-looking  statements  contained in this Form 10-QSB. You
should consider the material  presented in this Form 10-QSB in conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  - Risk  Factors  That May Affect  Future  Operating  Results" in the
Company's Form 10-KSB for the year ended December 31, 2003

      The inclusion of the forward-looking  statements should not be regarded as
a representation by the Company, or any other person, that such  forward-looking
statements  will  be  achieved.  We  undertake  no  duty  to  update  any of the
forward-looking  statements,  whether  as a result  of new  information,  future
events or  otherwise.  In light of the  foregoing,  readers are cautioned not to
place undue reliance on the forward-looking statements contained in this report.

OVERVIEW

      We are a leading video  compression  technology  firm. We have developed a
proprietary  technology  platform and the VPx family  (e.g.,  VP4,  VP5, VP6) of
video compression/decompression software ("codec") to deliver high-quality video
at the lowest possible data rates over proprietary  networks and the Internet to
set-top  boxes,  personal  computers  and wireless  devices.  Unlike other video
codecs that are based on  standard  compression  specifications  set by industry
groups (e.g., MPEG and H.264), our video compression software is based solely on
intellectual property that we developed and own ourselves.


                                      -11-
<PAGE>


     We offer the following suite of products and services that  incorporate our
proprietary compression technology:

PRODUCTS                     o  video codecs;
                             o  audio codecs; and
                             o  encoding and server software, for use with
                                video delivery platforms

SERVICES                     o  customized engineering and consulting
                                services;
                             o  technical support; and
                             o  high-level video encoding


      Our  customers  use our  products  and  services  chiefly to  provide  the
following video-related products and services to end users:

<TABLE>
<CAPTION>
       TYPE OF CUSTOMER APPLICATION                               EXAMPLES
       ----------------------------                               --------
<S>                                         <C>
Video and Audio Distribution over           o  providing video-on-demand services to residents
Proprietary Networks                           in multi-dwelling units (MDUs)
                                            o  video surveillance

Consumer Electronic Devices                 o  digital video players
                                            o  digital video recorders

Wireless Applications                       o  delivery of video via satellite
                                            o  providing video to web-enabled cell phones and PDAs

Video and Audio Distribution over           o  video-on-demand
IP-based Networks (Internet)                o  teleconferencing services
                                            o  video instant messaging
</TABLE>

      As discussed in greater  detail  below,  we earn revenue  chiefly  through
licensing  our software  and  providing  specialized  software  engineering  and
consulting services to customers. In addition to license fees, we often charge a
royalty fee based on the number of units of the customer's  products  containing
the relevant On2 software  products  that are sold or  distributed.  Some of our
agreements with customers also require that the customers pay us a percentage of
the revenues that they earn from any of their  products or services that use our
software.  Royalties may be subject to guaranteed minimum amounts.  We also sell
licenses to  third-party  resellers.  In  addition,  we  generally  require that
customers  pay us if they desire to receive any upgrades to our software  (e.g.,
from VP6 to VP7). We charge a fee for engineering and consulting services, based
on an estimate of the time it will take our  software  engineers  to provide the
services, or an hourly fee for ongoing services such as product support.


                                      -12-
<PAGE>


      The primary  factor that will be critical to our success is our ability to
continue to improve on our current video compression software so that it streams
the  highest-quality  video at the  lowest  transmission  rates (bit  rate).  We
believe  that our  video  compression  software  is highly  efficient,  allowing
customers  to  stream  comparatively   good-quality  video  (compared  with  our
competitors) at low bit rates (i.e., over slow connections) and unsurpassed high
resolution  video at high bit  rates  (i.e.,  over  broadband  connections).  As
connection  speeds increase,  however,  the advantage that our  highly-efficient
software has over competing technology may decrease.

      Another  factor that may affect our success is the relative  complexity of
our  video  compression   software  compared  with  other  compression  software
producing  comparable  compression rates and image quality.  Software with lower
complexity  can run on a  computer  chip that is less  powerful,  and  therefore
generally  less  expensive,  than  would be  required  to run  software  that is
comparatively  more complex.  Increased  compression  rates frequently result in
increased  complexity.  While potential  customers desire software that produces
the  highest  possible  compression  rates  while  producing  the best  possible
decompressed  image,  they also desire to keep production costs low by using the
lowest-powered  and accordingly least expensive chips that will still allow them
to perform the processing they require. In addition, in some applications,  such
as mobile devices,  size constraints rather than price issues limit the power of
the chips embedded in such devices.  Of course, in devices where a great deal of
processing  power can be devoted to video  compression  and  decompression,  the
issue  of  software  complexity  is less  important.  In  addition,  in  certain
applications,  savings  in  chip  costs  related  to the  use of low  complexity
software may be offset by increased  costs (or reduced  revenue)  stemming  from
less efficient compression (e.g., increased bandwidth costs).

      One  of  the  most  significant  recent  trends  in  our  business  is our
increasing  reliance on the success of the product deployments of our customers.
As  referenced  above,  an  increasing  number of our  license  agreements  with
customers  provide for the  payment of license  fees that are  dependent  on the
number of units of a customer's product incorporating our software that are sold
or the amount of revenue  generated  by a customer  from the sale of products or
services that  incorporate our software.  We have chosen this  royalty-dependent
licensing model because,  as a company of only 25 employees,  we do not have the
product  development  or marketing  resources  to develop and market  end-to-end
video  solutions.  Instead,  our software is primarily  intended to be used as a
building  block for companies  that are  developing  end-to-end  video  products
and/or  services.  Although we are confident  that we have adopted the licensing
model most  appropriate  for a  business  of our size and  expertise,  a natural
result of this  licensing  model is that the amount of revenue  we  generate  is
highly dependent on the success of our customers'  product  deployments.  If the
products of customers with whom we have  established per unit royalty or revenue
sharing  relationships do not generate  significant  sales, such revenue may not
attain  significant  levels.  Conversely,  if one or  more  of  such  customers'
products are widely adopted, our revenues will likely be enhanced.

      Another  significant  recent  trend in our  business is the  emergence  of
Microsoft as a principal competitor in the market for digital media creation and
distribution technology.  Microsoft currently competes with us in the market for
digital media servers, players, codecs and other technology and services related
to digital distribution of media.  Microsoft's commitment to and presence in the
media  delivery  industry has  increased.  Microsoft  distributes  its competing
streaming  encoder,  media server,  player,  tools and digital rights management
products by bundling them with its Windows  operating  systems and servers at no
additional  cost or otherwise  making them  available free of charge or at a low
cost.  Microsoft's  practices  have caused,  and may continue to cause,  pricing
pressure on our revenue generating products and services and may affect usage of
our competing products and formats.  Microsoft's  anticompetitive practices have
led in some cases, and could continue to lead to, longer sales cycles, decreased
sales,  loss of existing and potential  customers and reduced  market share.  In
addition,  we  believe  that  Microsoft  has  used and may  continue  to use its
monopoly position in the computer industry and its financial resources to secure


                                      -13-
<PAGE>


preferential or exclusive distribution, use and bundling contracts for its media
delivery  technologies  and products with third parties,  such as ISPs,  content
delivery networks,  content providers,  entertainment and media companies,  VARs
and OEMs, including third parties with whom we have relationships.

      A  potential  trend  that  we are  currently  monitoring  is the  possible
emergence of H.264 as a competitor in the video  compression  field.  H.264 is a
standards-based  codec that is the successor to MPEG-4.  Although we believe our
technology is superior to H.264,  H.264 may become  widely  adopted by potential
customers because,  as a standards-based  codec,  there are numerous  developers
programming  to the  H.264  standard  and  developing  products  based  on  such
standard.  In  addition,  there are  certain  customers  that  prefer to license
standards-based codecs.

      The  market  for  digital  media  creation  and  delivery   technology  is
constantly  changing and intensely  and  increasingly  competitive.  We have and
continue  to take a number  of steps to  address  this  competition.  First  and
foremost,    we    focus    on    providing    our    customers    with    video
compression/decompression  technology  that delivers the highest  possible video
quality at the lowest  possible  data  rates.  In order to do this,  we devote a
significant  portion of our  engineering  capacity to research and  development.
Although we expect that  competition  from Microsoft and others will continue to
intensify,  and that additional  competition from H.264 may emerge, we currently
expect that our video compression technology will remain competitive and that we
will continue to innovate in the video  compression  field.  We also address the
competitive  threats that we face by focusing on developing  relationships  with
customers who do not want to do business with  Microsoft  and/or do not find the
complex and rigid standards-based licenses and fee structures appealing.


                                      -14-
<PAGE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      This  discussion  and analysis of our  financial  condition and results of
operations are based on our condensed  consolidated  financial  statements  that
have been prepared  pursuant to the rules and  regulations of the Securities and
Exchange  Commission  ("SEC").  The  preparation  of our condensed  consolidated
financial  statements requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting  period.  Actual results could materially differ from those estimates.
The condensed  consolidated  financial  statements and the related notes thereto
should be read in  conjunction  with the  following  discussion  of our critical
accounting  policies  and our Form 10-KSB  filed with the SEC on March 30, 2004.
Our critical accounting policies and estimates are:

      o     Revenue recognition

      o     Valuation of goodwill, intangible assets and other long-lived assets

      Revenue  recognition.  We currently  recognize  revenue from  professional
services  and the sale of software  licenses.  As described  below,  significant
management  judgments and  estimates  must be made and used in  determining  the
amount  of  revenue  recognized  in  any  given  accounting   period.   Material
differences  may result in the amount  and timing of our  revenue  for any given
accounting  period  depending upon  judgments  made by or estimates  utilized by
management.

      We recognize  revenue in  accordance  with  Statement of Position  ("SOP")
97-2, "Software Revenue  Recognition",  as amended by SOP 98-4, "Deferral of the
Effective  Date  of SOP  97-2,  Software  Revenue  Recognition"  and  SOP  98-9,
"Modification  of SOP 97-2 with  Respect  to Certain  Transactions".  Under each
arrangement,  revenues are recognized when a  non-cancelable  agreement has been
signed and the customer  acknowledges  an  unconditional  obligation to pay, the
products  or  applications  have  been  delivered,  there  are no  uncertainties
surrounding  customer  acceptance,  the fees are  fixed  and  determinable,  and
collection is considered  probable.  Revenues  recognized from  multiple-element
software  arrangements are allocated to each element of the arrangement based on
the  fair  values  of the  elements,  such as  product  licenses,  post-contract
customer support,  or training.  The determination of the fair value is based on
the vendor specific  objective evidence available to us. If such evidence of the
fair value of each  element  of the  arrangement  does not  exist,  we defer all
revenue  from the  arrangement  until such time that  evidence of the fair value
does exist or until all elements of the arrangement are delivered.

      Our software licensing  arrangements  typically consist of two elements: a
software  license and  post-contract  customer  support  ("PCS").  We  recognize
license  revenues based on the residual method after all elements other than PCS
have been  delivered as  prescribed  by SOP 98-9. We recognize PCS revenues over
the term of the maintenance  contract or on a "per usage" basis,  depending upon
the terms of the contract.  Vendor specific objective evidence of the fair value
of PCS is determined by reference to the price the customer will have to pay for
PCS when it is sold separately (i.e. the renewal rate).  Each license  agreement
offers  additional  PCS at a stated  price.  Revenue is recognized on a per copy
basis for licensed software when each copy of the licensed software purchased by
the customer or reseller is  delivered.  We do not allow  returns,  exchanges or
price  protection for sales of software  licenses to our customers or resellers,
and  we  do  not  allow  our  resellers  to  purchase  software  licenses  under
consignment arrangements.

      When engineering and consulting services are sold together with a software
license,  the  arrangement  typically  requires  customization  and  integration
(porting)  of the  software  into a third  party  hardware  platform.  In  these
arrangements, we require the customer to pay a fixed fee for the engineering and
consulting  services  and  generally  require a  licensing  fee in the form of a
per-unit  royalty.  We account for  engineering  and consulting  arrangements in
accordance with SOP 81-1,  "Accounting for Performance of Construction  Type and


                                      -15-
<PAGE>


Certain  Production Type Contracts".  When reliable  estimates are available for
the costs and  efforts  necessary  to complete  the  engineering  or  consulting
services  and those  services do not  include  contractual  milestones  or other
acceptance  criteria,  we recognize  revenue under the  percentage of completion
contract  method based upon input measures,  such as hours.  When such estimates
are not available,  we defer all revenue recognition until we have completed the
contract and have no further obligations to the customer.

      Encoding Services consist of services that convert video and audio content
into formats for delivery to end-users. Encoding services are generally provided
under  per unit or time and  materials  contracts.  Under  these  contracts,  we
recognize  revenue  when  services  have been  rendered  and we have no  further
interest or obligation in the goods and services, which is generally the date on
which the goods or services have been delivered to the customer.

      Valuation of goodwill and  intangible  assets.  We evaluate our long-lived
assets in accordance with Statement of Financial  Accounting  Standards ("SFAS")
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed  Of.  Long-lived  assets that are not  identified  with an
impaired  asset are  reviewed  for  impairment  whenever  events or  changes  in
circumstances  indicate  that the net  carrying  value of the  asset  may not be
recoverable.  In such  circumstances,  the net  carrying  value of the  asset is
compared to the  undiscounted  future cash flows which that asset is expected to
generate..

      SFAS No. 142, "Goodwill and Other Intangible Assets" requires goodwill and
other  intangible  assets with  indefinite  lives to be tested for impairment at
least  annually,  and written off when impaired,  rather than being amortized as
previously required.

RESULTS OF OPERATIONS

 Revenue.  Revenue for the three  months  ended  March 31, 2004 was  $594,000 as
compared to  $1,283,000  for the three months ended March 31, 2003.  Revenue for
the three  months  ended  March 31,  2004 and 2003 was  derived  primarily  from
engineering and consulting  services and the sale of software licenses.  For the
three months ended March 31, 2004,  81% of the  Company's  revenue was generated
from 4  customers.  For the  three  months  ended  March  31,  2003,  92% of the
Company's revenue was generated from 3 customers.

      Operating expenses

      The Company's operating expenses consist of cost of revenue,  research and
development,  sales and  marketing  and  general  and  administrative  expenses.
Operating expenses for the three months ended March 31, 2004, were $1,243,000 as
compared to $1,435,000 for the three months ended March 31, 2003.

      Cost of  Revenue.  Cost  of  revenue  includes  personnel  and  consulting
compensation  costs,  related overhead expenses,  bandwidth costs, fees paid for
licensed  technology,  depreciation  costs  and the  amortization  of  purchased
technology (through September 2003). Cost of revenues was $342,000 for the three
months  ended March 31, 2004 as compared to $404,000  for the three months ended
March 31, 2003. The decrease is attributed to approximately  $157,000  reduction
in amortization of purchased  technology  partially offset by a $48,000 increase
in payments to E-world in  connection  with  generating  revenue in China and an
increase in personnel and operating costs.


                                      -16-
<PAGE>


      Research and  Development.  Research and  development  expenses  primarily
consist of salaries and related expenses and consulting fees associated with the
development  and production of our products and services,  operating lease costs
and depreciation costs.  Research and development  expenses for the three months
ended March 31, 2004 were  $250,000 as compared to $325,000 for the three months
ended March 31, 2003.  The decrease is  primarily  attributed  to a reduction in
compensation  and benefits  costs.  We believe  that  continued  investments  in
research and development are necessary to maintain our competitive advantage and
we will continue to invest in such costs as considered necessary.

      Sales and Marketing.  Sales and marketing  expenses  consist  primarily of
salaries  and  related  costs  of  sales,  business  development  and  marketing
personnel,  tradeshow costs,  marketing and promotional costs incurred to create
brand awareness and public relations expenses.  Sales and marketing expenses for
the three months ended March 31, 2004,  were $113,000 as compared to $85,000 for
the three months ended March 31, 2003.  The increase is primarily  attributed to
the increase in compensation and benefits costs due to an increase in headcount.
We intend to continue to recruit and hire experienced  personnel or consultants,
as necessary, to sell and market our products and services.

      General and  Administrative.  General and administrative  expenses consist
primarily  of  salaries  and  related  personnel  costs  for  general  corporate
functions,  facilities,  professional fees, insurance and depreciation.  General
and  administrative  costs for the three  months  ended  March  31,  2004,  were
$538,000 as compared to $621,000 for the three months ended March 31, 2003.  The
decrease is attributable to decreased  personnel and  depreciation  costs. We do
not anticipate significant  fluctuations in general and administrative  expenses
in the foreseeable future.

      Interest  and other  expense,  net.  Interest and other  expense,  net was
$73,000 for the three months ended March 31, 2004 as compared to $15,000 for the
three months ended March 31, 2003.  Interest and other  expense,  net  primarily
consists of interest paid for capital  lease  obligations  and  long-term  debt,
amortization  of debt discount and write down of marketable  equity  securities.
The increase is primarily  attributable  to a $61,000  write down of  marketable
equity securities.

      At March 31, 2004, we had approximately 26 full-time employees.  We expect
to hire employees as necessary in order to attain our strategic objectives.

LIQUIDITY AND CAPITAL RESOURCES

      At March 31,  2004,  we had cash  reserves  of  $2,668,000  as compared to
$2,963,000  at  December  31,  2003.  At March 31,  2004 the Company had working
capital of $2,994,000 as compared with $3,520,000 at December 31, 2003.

      Net cash used in  operating  activities  was $310,000 and $636,000 for the
three  months ended March 31, 2004 and 2003,  respectively.  The decrease in net
cash used in operating  activities is primarily  attributable  to an increase in
our net operating loss, excluding  depreciation and amortization,  offset by the
change in accounts receivable.

      Net cash used in investing activities was $17,000 and $3,000 for the three
months  ended March 31,  2004 and 2003,  respectively,  which  reflects a slight
increase in the purchase of property and equipment.

      Net cash provided by financing  activities was $9,000 and $570,000 for the
three months ended March 31, 2004 and 2003, respectively.  The sharp decrease is
primarily  attributable to a decrease of net proceeds received from the issuance
of common stock under the Company's Equity Line of Credit.


                                      -17-
<PAGE>


      We  currently  have no material  commitments  for the next 12 months other
than those under our operating lease  arrangements.  These arrangements  consist
primarily  of lease  arrangements  for our office  space in Clifton Park and New
York City.  The aggregate  required  payments for the next 12 months under these
arrangements  are  $178,000.  Notwithstanding  the above,  our most  significant
non-contractual  operating  costs for the next 12 months  are  compensation  and
benefit costs,  insurance costs and general overhead costs such as telephone and
utilities.  During the next 12 months,  we  anticipate  incurring  approximately
$400,000 per month in cash operating costs.

      Based on our current working  capital  requirements,  management  believes
additional funding will come from cash positive operating results. Additionally,
we may  require  additional  financing  to  fund  revenue  growth,  develop  new
technologies or acquire  strategic  assets.  Our management is actively pursuing
increases  to our net cash  flows  through  increases  in  revenues.  Management
believes that increases to operating cash flow, primarily through revenue growth
will  generate  sufficient  cash  flow to fund  our  operations  for the next 12
months.  However, there are no assurances that such matters will be successfully
consummated.  See "Management's  Discussion and Analysis of Financial  Condition
and  Results of  Operations  - Risk  Factors  That May Affect  Future  Operating
Results" in the Company's 10-KSB for the year ended December 31, 2003.

      In July 2001 the Company  entered into a Software  Development and License
Agreement  with Real Networks,  Inc. Under terms of the agreement,  we agreed to
develop a software  plug-in to  RealPlayer  that would allow  consumers  to play
files encoded in our VP4 and VP5  compression  format using the  RealPlayer.  In
conjunction  with the  development  of the  codec  software,  we also  agreed to
develop  a  software  plug-in  to  the  RealSystem   Server  that  would  enable
broadcasters  to stream VP4 and VP5 encoded files and a software  plug-in to the
RealProducer that would enable users of the RealProducer to encode content using
VP4  and  VP5.  In  order  for  us to  develop  the  plug-ins  described  in the
RealNetworks  agreement,  RealNetworks  was  required to provide us with certain
development software as well as fulfill certain other obligations.  RealNetworks
failed to deliver  such  software  and  perform  such other  obligations.  After
honoring the contract from its inception and attempting to resolve the situation
with RealNetworks for over 9 months through business discussions, in May 2002 we
notified  RealNetworks  that we were  terminating  the  agreement.  RealNetworks
responded and disputed our right to terminate the agreement and further  claimed
that we were in  breach  of the  agreement.  We  responded  by  reiterating  our
positions.  We have not had any contacts or discussions with RealNetworks  since
delivering this response.  As a result,  we are not generating any revenues from
the sale of RealNetworks related products.

      The Company  believes that our May 2002  termination  of the  RealNetworks
agreement was effective.  However, because the arrangement with RealNetworks was
exclusive  in certain  respects,  should it hereafter  be  determined  that such
termination  was not effective,  we could be restricted  from  supporting  other
software  platforms,  including certain components of our own software platforms
and,  although we do not believe that it would be the case, we might be found to
have breached the agreement with  RealNetworks.  Whether we might have liability
to RealNetworks depends on a variety of factors,  including whether RealNetworks
met its  obligations  to us,  whether it caused  any  breach  that we might have
committed and whether it otherwise  has  liability to us in connection  with the
agreement.

      We have experienced  significant  operating losses and negative  operating
cash  flows to date.  Our  management's  plan to  increase  our cash  flows from
operations  relies  significantly  on  increases in revenue  generated  from our
broadband technology services,  products and licenses and decreases in operating
expenses.  However,  there  are no  assurances  that we will  be  successful  in
effecting such increases.  The market for  distribution of broadband  technology
services is highly competitive. Additionally, our capital requirements depend on
numerous  factors,  including market  acceptance of our technology and services,
research and  development  costs and the  resources  we spend on  marketing  and
selling  our  products  and  services.  Additionally,  we  continue  to evaluate


                                      -18-
<PAGE>


investments in complementary  businesses,  products and services,  some of which
may be significant.

      In the event we cannot procure appropriate capital resources,  through net
operating  cash  flows,  we may be  required  to reduce the  development  of our
products  and  services or scale back  current  operations  until  funds  become
available on terms acceptable to us.

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      None.

ITEM 3. CONTROLS AND PROCEDURES.

(a)   Evaluation of Disclosure Controls and Procedures:

      Disclosure controls and procedures are designed to ensure that information
required to be  disclosed in the reports  filed or submitted  under the Exchange
Act is recorded,  processed,  summarized  and reported,  within the time periods
specified  in the SEC's  rules and forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed in the reports filed under the Exchange Act
is accumulated  and  communicated  to management,  including the Chief Executive
Officer and Chief Financial Officer,  as appropriate,  to allow timely decisions
regarding  required  disclosure.  Within the 90 days prior to the filing of this
report,  the Company  carried out an evaluation,  under the supervision and with
the  participation  of the Company's  management,  including the Company's Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the
design and operation of the Company's disclosure controls and procedures.  Based
upon and as of the date of that  evaluation,  the Chief  Executive  Officer  and
Chief Financial  Officer  concluded that the Company's  disclosure  controls and
procedures are effective to ensure that information  required to be disclosed in
the reports the Company  files and submits  under the  Exchange Act is recorded,
processed, summarized and reported as and when required.

(b)   Changes in Internal Controls:

      There were no  changes  in the  Company's  internal  controls  or in other
factors that could have significantly  affected those controls subsequent to the
date of the Company's most recent evaluation.


                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On May 3, 2004, On2 commenced arbitration against its customer, Beijing E-world.
The arbitration is pending in the London Court of International  Arbitration and
relates to a dispute  arising from two license  agreements  that On2 and E-world
entered into in June 2003. Under those agreements,  On2 licensed the source code
to its video  compression  (codec)  technology  to E-world for use in  E-world's
video disk (EVD) and high definition  television  (HDTV) products as well as for
other  non-EVD/HDTV  products.  The  license  agreements  imposed  a  number  of
obligations on E-world, including the requirements that:

      o     Commencing  in the first  calendar  quarter  of 2004 and  continuing
            through 2005, E-world pay to On2 certain minimum quarterly payments;


                                      -19-
<PAGE>


      o     E-world  cause  On2's  software  to be  included  in a  new  Chinese
            national standard for EVD by December 31, 2003; and

      o     E-world  use best  reasonable  efforts  to have  On2's  video  codec
            "ported" to (i.e.,  integrated with) a customized chip to be used in
            EVD players.

On2's  arbitration  claim  alleges  that,  despite  its  obligations  under  the
contract, E-world has:

      o     Failed to pay On2 the first quarterly payment of $411,000,  which is
            currently due and owing;

      o     Failed to cause On2's  software to be included in the EVD  standard;
            and

      o     Failed to use best  reasonable  efforts  to have On2's  video  codec
            ported to a chip.

      On2 has requested that the arbitrator award it $4,992,000 in damages under
      the  contract  and grant it further  relief as may be just and  equitable.
      E-world  has 30 days  from  the  date on which  On2  provided  it with the
      arbitration demand and notice of claim to respond, but as of today's date,
      E-world has not responded.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)   Exhibits

99.1  Certification  of Chief Executive  Officer  Pursuant to 18 U.S.C.  Section
      1350,  as Adopted  Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of
      2002.

99.2  Certification  of Chief Financial  Officer  Pursuant to 18 U.S.C.  Section
      1350,  as Adopted  Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of
      2002.

(b)   Reports on Form 8-K

      The  Company  filed Form 8-K on  February  26,  2004,  containing  a press
      release  announcing  the Company's  results of  operations  for the fourth
      quarter ending December 31, 2003.



                                      -20-
<PAGE>


                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned,  thereunto
duly authorized.


                                                 On2 Technologies, Inc.
                                          --------------------------------------
                                                      (Registrant)



May 13, 2004                              /s/ Anthony Principe
-------------------------------------     --------------------------------------
(Date)                                                 (Signature)
                                          Anthony Principe Vice
                                          President and Chief Financial Officer
                                                (Principal Financial Officer)



                                      -21-
<PAGE>


                                 CERTIFICATIONS

     I, Douglas A. McIntyre, certify that:

1) I have reviewed  this  quarterly  report on Form 10-QSB of On2  Technologies,
Inc.:

2) Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3)  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4)  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure controls and procedures (as defined) in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

    b) evaluated the effectiveness of the registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

    c)  presented  in  this   quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5) The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

6) The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  May 13, 2004          By: /s/ Douglas A. McIntyre
                                 -----------------------------------------------
                                 Douglas A. McIntyre
                                 Chairman, President and Chief Executive Officer



                                      -22-
<PAGE>


                                 CERTIFICATIONS

     I, Anthony Principe, certify that:

1) I have reviewed  this  quarterly  report on Form 10-QSB of On2  Technologies,
Inc.:

2) Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3)  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4)  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure controls and procedures (as defined) in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

    b) evaluated the effectiveness of the registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

    c)  presented  in  this   quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5) The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

6) The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  May 13, 2004               By: /s/ Anthony Principe
                                      ------------------------------------------
                                      Anthony Principe
                                      Vice President and Chief Financial Officer


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