SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

              Current Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

          Date of Report (Date of Earliest Event Reported): May 5, 2005


                             On2 Technologies, Inc.
             (Exact name of Registrant as specified in its charter)


                                    Delaware
                    (State of incorporation or organization)


                                     1-15117
                            (Commission File Number)


                                   84-1280679
                        (IRS Employer Identification No.)


                21 Corporate Drive, Suite 103, New York NY 12065
   (Address, including zip code, and telephone number, including area code, of
                    Registrant's principal executive offices)


                                 Not applicable
       (Former name, former address and former fiscal year, if applicable)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

|_|   Written communications pursuant to Rule 425 under the Securities Act (17
      CFR 230.425)
|_|   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)
|_|   Pre-commencement communications pursuant to Rule 14d-2(b) under the
      Exchange Act (17 CFR 240.14d-2(b))
|_|   Pre-commencement communications pursuant to Rule 13e-4(c) under the
      Exchange Act (17 CFR 240.13e-4(c))
<PAGE>

Item 1.01 Entry into a Material Definitive Agreement

On2 Technologies, Inc., 2005 Incentive Compensation Plan

      On May 5, 2005, at the Annual Meeting of Stockholders of On2 Technologies,
Inc. (the "Company"), the Company's stockholders approved the On2 Technologies,
Inc. 2005 Incentive Compensation Plan (the "2005 Plan").

      Set forth below is a brief description of the material terms and
conditions of the 2005 Plan. This description is not intended to be complete and
is qualified in its entirety by reference to the full text of the 2005 Plan as
set forth in Exhibit 10.1 hereto. Throughout the description, the words "On2",
"we", "us", "our" and the "Company" refer to On2 Technologies, Inc., and its
subsidiaries.

Purpose            The 2005 Plan is intended to allow the Company to remain
                   competitive in its ability to attract and retain
                   employees and to provide meaningful incentive
                   compensation to employees, directors, and consultants.

Shares Available   The maximum number of shares of our common stock that
                   may be delivered to participants under the 2005 Plan is
                   7 million shares, subject to certain adjustments.


Administration     The 2005 Plan is administered by the Compensation
                   Committee of the Board (the "Compensation Committee")
                   for all present and future employees of the Company and
                   its subsidiaries. The Board will administer the 2005
                   Plan for outside directors and consultants, based upon
                   recommendations by the Compensation Committee.

Eligibility for    All present and future employees of Company or any
Participation      subsidiary of Company whom the Compensation Committee
                   determines to have contributed or who can be expected to
                   contribute significantly to Company or an Company
                   subsidiary shall be eligible to receive Incentive Awards
                   under the Plan. In addition, the 2005 Plan also permits
                   awards to non-employee directors on the Board and to
                   certain individuals who are consultants or advisors to
                   Company.

Types of Benefits  The Incentive Plan provides for the grant of any or all
                   of the following types of benefits: (1) stock options,
                   including incentive stock options; (2) stock
                   appreciation rights; (3) stock awards; (4) performance
                   awards; (5) goal-based stock awards; and (6) cash awards
                   (collectively, "Benefits"). Benefits may be granted
                   singly, in combination, or in tandem as determined by
                   the Compensation Committee. Stock awards, performance
                   awards, stock units, and cash awards may, as determined
                   by the Compensation Committee in its discretion,
                   constitute Performance-Based Awards, as described below.
                   Directors and Consultants are only eligible to receive
                   grants of restricted stock and certain types of stock
                   options.

                   Stock Options and Stock Appreciation Rights.

                   The Compensation Committee may grant options to
                   employees, outside directors, and consultants and
                   establish the terms and conditions for exercising an
                   option. Options may either be incentive stock options,
                   qualifying for special tax treatment, or non-qualified
                   options; however, no incentive stock option shall be
                   issued to a participant in tandem with a non-qualified
                   stock option. The exercise price of an option will be at
                   least 100% of the fair market value of company stock on
                   the date that the option is granted.
<PAGE>

                   Stock Appreciation Rights (SARS) may be granted on all
                   or any part of an option, or separately from an award of
                   options, and also are subject to terms and conditions
                   set by the Compensation Committee. An SAR entitles the
                   participant to receive an amount equal to the excess of
                   (i) the fair market value on the date of exercise of
                   stock covered by the surrendered stock appreciation
                   right over (ii) the price of the stock on the date the
                   stock appreciation right was granted. The award can be
                   paid in stock only. Directors and consultants are not
                   eligible to receive SARs.

                   The Compensation Committee will set the term of each
                   option for employees; no option will be exercisable,
                   however, after the expiration of eight years from the
                   date the option is granted, subject to the other
                   provisions of the 2005 Plan. Participants can exercise
                   any option and can make payment of the stock option
                   price by delivering cash or other approved payment. The
                   Board will set the term of options for outside directors
                   and consultants under the same limitations.

                   Restricted Stock Awards.

                   The Compensation Committee may grant restricted stock to
                   the Company's employees, outside directors, or
                   consultants. Restricted Stock will be company stock
                   subject to certain terms and conditions imposed by the
                   Compensation Committee. Restricted stock awards may be
                   issued to participants for no cash consideration, either
                   alone or in addition to other awards granted. The
                   minimum restriction period applicable to any restricted
                   stock award that is not subject to performance
                   conditions restricting the grant size, transfer of
                   shares or vesting of the award shall be three years from
                   the date of grant.

                   Goal-Based Stock Awards.

                   The Compensation Committee may grant goal-based stock,
                   which is company stock subject to performance goals. The
                   stock is not issued to the participant until the
                   Compensation Committee certifies that the performance
                   goals (and any other terms and conditions) have been
                   met. Goal-based stock may be issued without cash
                   consideration.

                   Performance Grants.

                   Performance grants are subject to the achievement of
                   pre-established performance goals and are administered
                   to comply with the requirements of Section 162(m) of the
                   Internal Revenue Code. Performance goals use objective
                   and quantifiable performance criteria.

                   Performance Criteria are based on the performance of the
                   Company or any subsidiary, division, business unit or
                   individual using one of a number of quantitative and
                   qualitative measures.

Other Features     The Company also adopted a sub-plan (the "U.K Sub-plan")
                   to the 2005 Plan to allow for grants to the two
                   employees at its Cambridge, U.K., research and
                   development facility. The U.K. Sub-Plan was previously
                   adopted by the Board as a sub-plan to the 2000 Plan, and
                   was adopted under the provisions of the Enterprise
                   Management Incentive Scheme ("EMI"), a share option
                   scheme approved by the government of the United Kingdom.

                   The 2005 Plan provides for equitable adjustment of
                   Benefits in the event of stock dividend, stock split or
                   combination of shares, recapitalization or merger in
                   which Company is the surviving corporation or other
                   change in Company's capital stock, including, but not
                   limited to, the creation or issuance to shareholders
                   generally of rights, options or warrants for the
                   purchase of common stock or preferred stock of Company.
                   The 2005 Plan contains provisions for the acceleration
                   of exercisability or vesting of Benefits in the event of
                   a change of control of Company. The Compensation
                   Committee has broad discretion in determining under what
                   circumstances adjustments should be made to Benefits
                   under the plan (including a change in control of
                   Company) and in the adjustments themselves.
<PAGE>

                   The 2005 Plan also provides that incentive stock options
                   shall not be transferable except by will or by the laws
                   of descent and distribution and shall be exercisable,
                   during the participant's lifetime, only by the
                   participant.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

      10.1  On2   Technologies,   Inc.,   2005   Incentive   Compensation   Plan
            (incorporated  by  reference  from  Exhibit  A to  Notice  and Proxy
            Statement of the Company for the Annual  Stockholder  Meeting on May
            5, 2005).

      10.2  On2  Technologies,  Inc., 2005 Incentive  Compensation  Plan Form of
            Stock Option Grant.
<PAGE>

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


Date: May 11, 2005        On2 Technologies, Inc.


                          By: /s/ Doug McIntyre
                              -------------------------------
                          Name:  Doug McIntyre
                          Title: Chairman, President and CEO
<PAGE>

                             On2 Technologies, Inc.
                           Current Report On Form 8-K
                               Dated May 11, 2005
                                  EXHIBIT INDEX

Exhibit Number     Description

      10.1         On2 Technologies, Inc., 2005 Incentive Compensation Plan
                   (incorporated by reference from Exhibit A to Notice and
                   Proxy Statement of the Company for the Annual
                   Stockholder Meeting on May 5, 2005).

      10.2         On2 Technologies,  Inc., 2005 Incentive Compensation Plan
                   Form of Stock Option Grant.
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SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

              Current Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

          Date of Report (Date of Earliest Event Reported): May 5, 2005

                             On2 Technologies, Inc.
             (Exact name of Registrant as specified in its charter)

                                    Delaware
                    (State of incorporation or organization)

                                     1-15117
                            (Commission File Number)

                                   84-1280679
                        (IRS Employer Identification No.)

                21 Corporate Drive, Suite 103, New York NY 12065
   (Address, including zip code, and telephone number, including area code, of
                    Registrant's principal executive offices)

                                 Not applicable
       (Former name, former address and former fiscal year, if applicable)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

|_|   Written communications pursuant to Rule 425 under the Securities Act (17
      CFR 230.425)
|_|   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)
|_|   Pre-commencement communications pursuant to Rule 14d-2(b) under the
      Exchange Act (17 CFR 240.14d-2(b))
|_|   Pre-commencement communications pursuant to Rule 13e-4(c) under the
      Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement

On2 Technologies, Inc., 2005 Incentive Compensation Plan

      On May 5, 2005, at the Annual Meeting of Stockholders of On2 Technologies,
Inc. (the "Company"), the Company's stockholders approved the On2 Technologies,
Inc. 2005 Incentive Compensation Plan (the "2005 Plan").

      Set forth below is a brief description of the material terms and
conditions of the 2005 Plan. This description is not intended to be complete and
is qualified in its entirety by reference to the full text of the 2005 Plan as
set forth in Exhibit 10.1 hereto. Throughout the description, the words "On2",
"we", "us", "our" and the "Company" refer to On2 Technologies, Inc., and its
subsidiaries.

Purpose            The 2005 Plan is intended to allow the Company to remain
                   competitive in its ability to attract and retain
                   employees and to provide meaningful incentive
                   compensation to employees, directors, and consultants.

Shares Available   The maximum number of shares of our common stock that
                   may be delivered to participants under the 2005 Plan is
                   7 million shares, subject to certain adjustments.

Administration     The 2005 Plan is administered by the Compensation
                   Committee of the Board (the "Compensation Committee")
                   for all present and future employees of the Company and
                   its subsidiaries. The Board will administer the 2005
                   Plan for outside directors and consultants, based upon
                   recommendations by the Compensation Committee.

Eligibility for    All present and future employees of Company or any
Participation      subsidiary of Company whom the Compensation Committee
                   determines to have contributed or who can be expected to
                   contribute significantly to Company or an Company
                   subsidiary shall be eligible to receive Incentive Awards
                   under the Plan. In addition, the 2005 Plan also permits
                   awards to non-employee directors on the Board and to
                   certain individuals who are consultants or advisors to
                   Company.

Types of Benefits  The Incentive Plan provides for the grant of any or all
                   of the following types of benefits: (1) stock options,
                   including incentive stock options; (2) stock
                   appreciation rights; (3) stock awards; (4) performance
                   awards; (5) goal-based stock awards; and (6) cash awards
                   (collectively, "Benefits"). Benefits may be granted
                   singly, in combination, or in tandem as determined by
                   the Compensation Committee. Stock awards, performance
                   awards, stock units, and cash awards may, as determined
                   by the Compensation Committee in its discretion,
                   constitute Performance-Based Awards, as described below.
                   Directors and Consultants are only eligible to receive
                   grants of restricted stock and certain types of stock
                   options.

                   Stock Options and Stock Appreciation Rights.

                   The Compensation Committee may grant options to
                   employees, outside directors, and consultants and
                   establish the terms and conditions for exercising an
                   option. Options may either be incentive stock options,
                   qualifying for special tax treatment, or non-qualified
                   options; however, no incentive stock option shall be
                   issued to a participant in tandem with a non-qualified
                   stock option. The exercise price of an option will be at
                   least 100% of the fair market value of company stock on
                   the date that the option is granted.
Stock Appreciation Rights (SARS) may be granted on all
                   or any part of an option, or separately from an award of
                   options, and also are subject to terms and conditions
                   set by the Compensation Committee. An SAR entitles the
                   participant to receive an amount equal to the excess of
                   (i) the fair market value on the date of exercise of
                   stock covered by the surrendered stock appreciation
                   right over (ii) the price of the stock on the date the
                   stock appreciation right was granted. The award can be
                   paid in stock only. Directors and consultants are not
                   eligible to receive SARs.

                   The Compensation Committee will set the term of each
                   option for employees; no option will be exercisable,
                   however, after the expiration of eight years from the
                   date the option is granted, subject to the other
                   provisions of the 2005 Plan. Participants can exercise
                   any option and can make payment of the stock option
                   price by delivering cash or other approved payment. The
                   Board will set the term of options for outside directors
                   and consultants under the same limitations.

                   Restricted Stock Awards.

                   The Compensation Committee may grant restricted stock to
                   the Company's employees, outside directors, or
                   consultants. Restricted Stock will be company stock
                   subject to certain terms and conditions imposed by the
                   Compensation Committee. Restricted stock awards may be
                   issued to participants for no cash consideration, either
                   alone or in addition to other awards granted. The
                   minimum restriction period applicable to any restricted
                   stock award that is not subject to performance
                   conditions restricting the grant size, transfer of
                   shares or vesting of the award shall be three years from
                   the date of grant.

                   Goal-Based Stock Awards.

                   The Compensation Committee may grant goal-based stock,
                   which is company stock subject to performance goals. The
                   stock is not issued to the participant until the
                   Compensation Committee certifies that the performance
                   goals (and any other terms and conditions) have been
                   met. Goal-based stock may be issued without cash
                   consideration.

                   Performance Grants.

                   Performance grants are subject to the achievement of
                   pre-established performance goals and are administered
                   to comply with the requirements of Section 162(m) of the
                   Internal Revenue Code. Performance goals use objective
                   and quantifiable performance criteria.

                   Performance Criteria are based on the performance of the
                   Company or any subsidiary, division, business unit or
                   individual using one of a number of quantitative and
                   qualitative measures.

Other Features     The Company also adopted a sub-plan (the "U.K Sub-plan")
                   to the 2005 Plan to allow for grants to the two
                   employees at its Cambridge, U.K., research and
                   development facility. The U.K. Sub-Plan was previously
                   adopted by the Board as a sub-plan to the 2000 Plan, and
                   was adopted under the provisions of the Enterprise
                   Management Incentive Scheme ("EMI"), a share option
                   scheme approved by the government of the United Kingdom.

                   The 2005 Plan provides for equitable adjustment of
                   Benefits in the event of stock dividend, stock split or
                   combination of shares, recapitalization or merger in
                   which Company is the surviving corporation or other
                   change in Company's capital stock, including, but not
                   limited to, the creation or issuance to shareholders
                   generally of rights, options or warrants for the
                   purchase of common stock or preferred stock of Company.
                   The 2005 Plan contains provisions for the acceleration
                   of exercisability or vesting of Benefits in the event of
                   a change of control of Company. The Compensation
                   Committee has broad discretion in determining under what
                   circumstances adjustments should be made to Benefits
                   under the plan (including a change in control of
                   Company) and in the adjustments themselves.
The 2005 Plan also provides that incentive stock options
                   shall not be transferable except by will or by the laws
                   of descent and distribution and shall be exercisable,
                   during the participant's lifetime, only by the
                   participant.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

      10.1  On2   Technologies,   Inc.,   2005   Incentive   Compensation   Plan
            (incorporated  by  reference  from  Exhibit  A to  Notice  and Proxy
            Statement of the Company for the Annual  Stockholder  Meeting on May
            5, 2005).

      10.2  On2  Technologies,  Inc., 2005 Incentive  Compensation  Plan Form of
            Stock Option Grant.
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Date: May 11, 2005        On2 Technologies, Inc.

                          By: /s/ Doug McIntyre
                              -------------------------------
                          Name:  Doug McIntyre
                          Title: Chairman, President and CEO
On2 Technologies, Inc.
                           Current Report On Form 8-K
                               Dated May 11, 2005
                                  EXHIBIT INDEX

Exhibit Number     Description

      10.1         On2 Technologies, Inc., 2005 Incentive Compensation Plan
                   (incorporated by reference from Exhibit A to Notice and
                   Proxy Statement of the Company for the Annual
                   Stockholder Meeting on May 5, 2005).

      10.2         On2 Technologies,  Inc., 2005 Incentive Compensation Plan
                   Form of Stock Option Grant.