SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K







FOR
ANNUAL AND TRANSITION REPORTS


PURSUANT
TO SECTIONS 13 OR 15(D) OF THE


SECURITIES
EXCHANGE ACT OF 1934




x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the fiscal year ended December 31, 2008


OR


 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the transition period
fromto




Commission
File Number 000-29609





ONVIA,
INC.


(Exact
Name of Registrant as Specified in its Charter)


Delaware
            91-1859172(State
      or Other Jurisdiction
              of
      Incorporation or Organization)
            (I.R.S.
      Employer
              Identification
      No.)


509
Olive Way, Suite 400, Seattle, Washington 98101


(Address
of Principal Executive Offices)


(206) 282-5170


(Registrant’s
Telephone Number, Including Area Code)





Securities
Registered Pursuant to Section 12(b) of the Act:


Title
      of each class
            
            Name
      of exchange on which registeredCommon
      Stock, $.0001 par value per share
            
            The
      NASDAQ Global Market


Securities
Registered Pursuant to Section 12(g) of the Act:


None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes   ̈    No  x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes   ̈    No  x





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 twelve 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.  Yes x    No   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
      Yes x    No   ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.


Large
accelerated filer   ̈    Accelerated
filer   ̈    Non-accelerated
filer   ̈
    Smaller reporting company  x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  ̈    No  x





The
aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant, based on the closing price on June 30, 2008,
as reported on the NASDAQ Global Market, was $30,062,825.




The
number of shares of the registrant’s common stock outstanding at March 1, 2009
was 8,246,828.





DOCUMENTS
INCORPORATED BY REFERENCE


Portions
of the registrant’s proxy statement related to its 2009 annual stockholders’
meeting to be filed subsequently are incorporated by reference into Part III of
this Form 10-K










ONVIA,
INC.




FORM
10-K


For
the Year Ended December 31, 2008




INDEX







PAGEPART
      I.
                                                    
                                                    1ITEM
      1.
                                                    BUSINESS
                                                    1ITEM
      1A.
                                                    RISK
      FACTORS
                                                    8ITEM
      1B.
                                                    UNRESOLVED
      STAFF COMMENTS
                                                    13ITEM
      2.
                                                    PROPERTIES
                                                    14ITEM
      3.
                                                    LEGAL
      PROCEEDINGS
                                                    14ITEM.4.
                                                    SUBMISSION
      OF MATTERS TO A VOTE OF SECUIRY HOLDERS
                                                    15PART
      II.
                                                    
                                                    17ITEM
      5.
                                                    MARKET
      FOR THE REGISTRANT'S COMMON EQUITY,  SECURITIES RELATED
      STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES
                                                    17ITEM
      6.
                                                    SELECTED
      CONSOLIDATED FINANCIAL DATA
                                                    19ITEM
      7.
                                                    MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                                    20ITEM
      7A.
                                                    QUANTITIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
                                                    28ITEM
      8.
                                                    CONSOLIDATED
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                    31CONSOLIDATED
      BALANCE SHEET
                                                    31CONSOLIDATED
      STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) / INCOME
                                                    32CONSOLIDATED
      STATEMENT OF CASH FLOWS
                                                    33CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY
                                                    34NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
                                                    35ITEM
      9.
                                                    CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES
                                                    46ITEM
      9A(T).
                                                    CONTROLS
      AND PROCEDURES
                                                    47ITEM
      9B.
                                                    OTHER
      INFORMATION
                                                    48PART
      III.
                                                    
                                                    49ITEM
      10.
                                                    DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
                                                    49ITEM
      11.
                                                    EXECUTIVE
      COMPENSATION
                                                    49ITEM
      12.
                                                    SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                                                    49ITEM
      13.
                                                    CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                                                    49ITEM
      14.
                                                    PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                                                    49PART
      IV.
                                                    
                                                    50ITEM
      15.
                                                    EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
                                                    50SIGNATURES
                                                    
                                                    52







PART
I




CAUTIONARY
STATEMENT




In
addition to the historical information contained herein, the discussion and
analysis in this report contains forward-looking statements. When used in this
discussion, the words “believes,” “anticipates,” “may,” “will,” “should,”
“expects,” “plans,” “estimates,” “predicts,” “potential,” “continue,” “intends”
or the negative of these and similar expressions are intended to identify
forward-looking statements, but the absence of these words does not necessarily
mean that a statement is not forward-looking. Forward-looking statements
include, but are not limited to, statements about our plans, objectives,
expectations and intentions and are subject to risks and uncertainties that
could cause actual results to differ materially from those expected or implied
by these forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of
this report. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including the factors
described under “Risk Factors” and elsewhere in this report. Onvia undertakes no
obligation to publicly release any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of anticipated events. Readers are urged, however, to
review the factors and risks described in reports Onvia files from time to time
with the Securities and Exchange Commission.





In
this report, we rely on and refer to information and statistics regarding the
markets for various products. We obtained this information from third-party
sources, discussions with our customers and our own estimates. We believe that
these third-party sources are reliable, but we have not independently verified
them and there can be no assurance that they are accurate.




ITEM 1.
            BUSINESS




In this
report, the words “we,” “our,” “us,” “Onvia,” or the “Company” refer to Onvia,
Inc. and its wholly owned subsidiary.





Company
Overview




We are a
leading provider of information products and planning tools that help companies
plan, market and sell to targeted markets throughout the United States, or
U.S.  Our information products and planning tools focus on federal,
state, local and educational purchasing entities, and on early stage commercial
and residential infrastructure projects.  Our information products and
planning tools help clients proactively track their competitors, analyze market
trends, and identify new market opportunities.  Marketers can research
government agencies and private sector businesses to establish and maintain
business relationships.  Our clients can leverage sales leads from our
database in the form of new business prospects, alerts for upcoming contracting
opportunities, and from historical public and private infrastructure projects to
find and win new revenue opportunities. Historically,
comprehensive market intelligence was only available to large companies with the
resources to perform the research and store the data themselves, or companies
that could afford to hire outside firms to perform the research for
them.  Our processes, which collect and organize transactional
information into actionable market intelligence, have enabled us
to make the same high-value sales intelligence affordable to businesses of all
sizes.  We believe our business solutions provide our clients with a
distinct competitive advantage.





Our  information
products and planning tools leverage its proprietary database, Onvia Dominion®,
which has been compiled over the last ten years, and includes comprehensive,
historical and real-time information on public and private infrastructure
activities unavailable elsewhere in the marketplace.  Public sector
information within the Onvia Dominion® database is classified and linked within
four key hubs of data: project history, agency research, buyer research and
competitive intelligence.  Our database provides information on
approximately 5 million procurement related records connected to over 275,000
companies from across approximately 78,000 government agencies and purchasing
offices nationwide.  Thousands of records are added to our database
each day.  Private sector data includes over 160,000 current and
historical opportunities covering activity within the top 85 U.S. markets, and
comprehensive information on tens of thousands of companies, including
architects, developers, owners and land use attorneys.  The data
collected covers high demand land use planning details, including zoning
changes, development type, proposed use and key contacts for each
project.  We also provide contact information for over 24,000 planning
and zoning officials.  Information in our database has been collected,
formatted and classified by an in-house team of researchers and third-party
providers so clients are able to quickly find and analyze information relevant
to their businesses.





1


Most of
our revenues are currently generated from three main business channels:
subscriptions, content licenses,
and management reports.  Subscription-based services are typically
prepaid, have a minimum term of one year and revenues are recognized ratably
over the term of the subscription.  Subscriptions are priced based
upon the geographic range, nature of content purchased and, with respect to
certain products, the number of users or number of records
purchased.





Revenue
from content licenses is generated from clients who resell our business content
data to their customers.  Content license contracts are generally
multi-year arrangements that are invoiced on a monthly or quarterly basis, and
these agreements typically have a higher annual contract value or ACV than our
subscription-based services. ACV represents the aggregate annual contract value
of our client base. Revenue from
content license agreements is recognized ratably over the term of the
agreement.





Revenue
from the sale of management information reports is recognized upon delivery of
the report to the client.  Pricing for management reports is generally
based on one,
or a combination of, the following:
the number of records included in the report; the geographic range of the
report; or a flat fee based on the type of report.  We also generate
revenue from document download services and list rental services, and these fees
are recognized upon delivery.





We were
incorporated in January 2000 in the state of Delaware.  Our principal
corporate office is located in Seattle, Washington.  Our common stock
trades on the NASDAQ Global Market under the symbol ONVI.





Industry
Background




The
infrastructure marketplace, defined as the industries supported by public and
private construction projects and facilities maintenance, spends over $1
trillion annually. Over 3.4 million
businesses compete for opportunities within this highly competitive marketplace
and identifying qualified business partners and prospects is essential to the
success of companies that operate in the infrastructure
market-place.  Identifying relevant infrastructure projects and
partners can be difficult and companies spend a substantial amount of time and
effort to locate and research potential partners and opportunities to grow their
businesses.  The Internet provides short-term visibility into
government and private sector contracting information for both government
agencies and businesses alike, but does not provide the on-demand intelligence
required to guide strategic decisions.





Even
after a new business opportunity is identified, many companies do not have
enough information to prequalify the opportunity, such as decision maker
information, the purchasing history of the government agency or project owner,
and who competes for similar projects.  This information is useful not
only for companies contracting directly with the project owner, but also for
subcontractors that would like to compete for work on awarded
contracts.  This information is rarely available from one source, and
may not be available at all for completed projects.





Success
in the private commercial and residential construction marketplace is largely
based upon strong business relationships and early involvement.  Development
projects must be identified early in the planning and zoning process for a
contractor or architect to be considered for the engagement.  Business
relationships are essential for some specialties, such as environmental
engineers, who may need to identify projects before presentation to the zoning
and planning board.  Strong segment contacts are the primary way
companies identify private sector projects at the very earliest
stage.  Companies competing in this market need to know who the key
decision makers are within their industry and region to ensure that they are
properly positioned to win future opportunities.





Public
sector opportunities are difficult to prequalify for most
businesses.  Often, revenue opportunities are included within the
specification documents supporting the request for proposal, or RFP, and request
for quote, or RFQ.  Without tools to quickly identify the pertinent
information, businesses must review extensive documentation to identify relevant
business opportunities.  Our
comprehensive database contains much of this information on both a historical
and real-time basis with thousands of new records added to our database each
day.  Much of the information in our database is linked, so clients
can quickly research information relevant to a particular project in one
centralized location.  Our clients can also perform customized
searches on both the public record and within the project specification
documents to identify relevant opportunities using any number of variables, such
as publication date, geographic location and contract value, among
others.  Using our database and tools, clients spend less time on
research and more time preparing proposals, establishing relationships, and
executing contracts.





Products
and Services




Our
products and services provide access to our proprietary Onvia Dominion database
of project specific information and provide clients specialized tools for
analyzing information relevant to their businesses.  We expect to
continue to expand our content and develop new database analysis and access
tools to meet the needs of existing clients as well as potential new categories
of clients.


2





We
leverage technology, tools and business processes to research, classify and
publish actionable public and private sector opportunities from public and
private sources. Through an automated process, we link related records within
our database, prequalify business opportunities for clients based upon the
client’s profile, and provide access to the information in a timely manner,
generally within 24 hours of their public release. Our database contains
information on the largest industry verticals, with a focus on the
infrastructure verticals, which include:





·
            Architecture
      and Engineering


·
            Construction
      and Building Supplies


·
            IT
      / Telecommunications


·
            Professional
      Services


·
            Operations
      and Maintenance Services


·
            Transportation


·
            Healthcare


·
            Water
      and Energy / Alternative Energy





Within
these verticals we also provide hard-to-find content, which presents a
comprehensive view of a project throughout the most critical phases of the
procurement lifecycle. These transactional records include:





·
            Advance
      Notice – alerts businesses of projects in the early stages of the
      development process, before the bid or RFP is released in its final form,
      or before final zoning and planning board
  approval;


·
            RFPs,
      RFQs, and related amendments;


·
            Planholders
      and Bidders Lists – provides competitive intelligence by presenting a list
      of competitors that have acquired plans, specifications, bidding documents
      and/or proposals for specific projects in the active bid or proposal
      stage, and a list of competitors who submit bids for prime contracts with
      the owner of the project;


·
            Bid
      Results and Awards Information – notifies businesses of awarded bids,
      providing information for use in their own sales and marketing activities;
      and


·
            Grants
      – supplies federal grant information critical to businesses tracking or
      applying for publicly-funded
projects.





Our
public and private sector solutions are two distinct service offerings, but when
used together, the complementary resources provide a comprehensive view of the
infrastructure marketplace.





Our
business solutions are comprised of the following products:





Onvia Business
Builder


Onvia
Business Builder is our flagship public sector product and is intended to enable
businesses of all sizes to effectively compete in the government procurement
marketplace.  This product leverages our proprietary database of
historical information gathered from local, state and federal government
agencies and education entities to help clients evaluate and respond to new bid
requests and RFPs with more competitive responses by allowing them to easily
research competitor and buyer information.





Subscribers
to Onvia Business Builder receive customized daily email notifications about
relevant business opportunities in their industries associated around four key
data hubs: project history, agency research, agency buyer research, and
competitor research. Agency buyer refer to the procurement officers at the
agencies our clients are attempting to win business from.  The
collective view of this information provides visibility into purchasing trends
by agency and by agency buyer to evaluate potential competitors.





3


Project
History


Project
History tracks information through a project’s life cycle, including advance
notice information, planholder/bidder lists and bid results as available.
Project history provides competitive intelligence as well as leads on potential
subcontracting opportunities.





Agency
Research


Agency
Research offers historical research into government agencies, including
procurement archives, decision maker contact lists and purchasing contact
lists.  This intelligence provides insight into purchasing trends
within each agency and allows clients to tailor bids and proposals for each
sales opportunity.





Buyer
Research


Buyer
Research provides purchasing history related to government purchasing
officers,
including their areas of expertise and past relationships with other
vendors.  This information enables clients to effectively target their
sales activity and manage relationships with government purchasers.





Competitor
Research


Competitor
Research is a public sector activity archive that informs clients about where
their competitors have won contracts and provides detailed product and price
information that enables clients to conduct competitive analysis prior to
submitting bids and proposals.





Onvia
Business Builder provides information necessary to qualify opportunities,
improve decision making, prepare tailored bids, and manage agency relationships,
all of which should improve the success rates of the our clients in obtaining
new procurement awards.





The Onvia
Guide


Onvia
Guide subscribers receive the same customized daily email notifications about
relevant business opportunities that subscribers to the Onvia Business Builder
product receive, without the user interface to research information in our
database.  This product is an affordable entry level option for our
clients.





Onvia Planning and
Construction


In
February 2008, we expanded our business solutions to include information on the
commercial and residential development market.  Onvia Planning and
Construction, or OPC, provides early stage project information on commercial and
residential development projects.  This market intelligence solution
is comprehensive, covering the top 85 metropolitan areas within the United
States.  Our database of over 160,000 commercial and residential
records provides a detailed overview of the commercial and residential
marketplace.  This market intelligence can be leveraged to identify
business expansion opportunities and growth markets, evaluate overall market
conditions, forecast demand for specific products and services, and align
personnel and resources with future opportunities.  At the tactical
level, OPC helps companies identify upcoming projects and sales opportunities by
monitoring land use planning and zoning information.  New and updated
land use activities can be tracked with daily customized alerts delivered
directly to our clients’ inbox.  Clients can research projects and the
companies associated with each project, and track permit approval and project
status as the engagement progresses.  The company and project
information can be used to build relationships with corporate decision makers
and planning officials to be in a good position to act upon future
opportunities.





Management
Reports


In
addition to subscription services, we also offer a number of custom management
information reports. These reports are generally one-time deliverables and
revenue is recognized upon delivery.


·
            Term Contracts –
      Contain actionable sales information on term or continuing service
      contracts at public agencies coming up for renewal.  With this
      report clients know what contracts exist, when they are coming up for
      renewal, who the incumbent is and who the buyers are, allowing our clients
      to perform an early evaluation of the opportunity so they can be more
      competitive with their proposals to increase their public sector
      business.


·
            Contact Lists – Provide
      clients a comprehensive list of decision makers, agency procurement
      officers and zoning officials that can be used to develop relationships
      and identify potential business
partners.


·
            Market Opportunity
      Reports – Provides market intelligence needed for strategic
      planning and marketing, such as:


o
            Year-over-year
      growth rates by market or category to help understand buying
      trends;


o
            Market
      growth rates to assist in business
planning;


o
            Distribution
      of state and local opportunities by sales territory to help allocate
      resources;


o
            Competitive
      analysis; and


o
            Seasonality
      and buying trends.


·
            Winning Proposals
      Library – Compare and contrast winning proposals submitted by
      competing firms in order to gain competitive insights.  Provides
      insight into how other companies position their qualifications and
      personnel, structure and format persuasive proposals, incorporate
      supporting materials, price goods and services, and differentiate
      themselves from their competitors.





4





Strategy




Our
mission is to be the competitive advantage that powers sales and marketing
results through actionable information and insight. Key elements of our strategy
include:





·
            Expand the
      valuable content included in the database:  Historically,
      we have collected hard to find information types to increase the value of
      content to clients such as planholders lists, bidder lists, and agency
      decision maker lists.  In 2008 we introduced private sector
      commercial and residential development information dating back to January
      2007.  By expanding the coverage of current and historical
      information, we believe content will be applicable to broader market
      segments, and should improve retention of our existing client
      base.


·
            Enhance our
      existing information products and planning tools:Over
      the last several years, we have introduced new tools to enhance the access
      to information contained in our database and tools to improve the
      relevance of the information returned from searches against our database.
      In 2005, we introduced Onvia Business Builder which was enhanced in 2006
      to allow clients the option to use a limited search capability without
      access to the complete database, and in 2008 we introduced Onvia Planning
      and Construction. In 2009, we are continuing to develop new core
      technologies, including a comprehensive new user interface which combines
      access to public and private sector data. By continuing to enhance our
      product offering through the introduction of new tools and content that
      further improve our clients’ ability to tailor the information to the
      needs of their business, we expect that this will increase the
      satisfaction of our existing clients, thereby increasing retention rates,
      and broaden the appeal of our products to potential new categories of
      clients.


·
            Understand
      client needs:We are committed to intimately understanding the
      needs of our clients and the marketplace. In February 2008, we performed a
      comprehensive market research study to gain further insight on the
      business development needs of our clients and results of this research led
      to the introduction of Onvia Planning and Construction.  We will
      continue to solicit feedback from our clients to understand their needs,
      specifically as they relate to new information requirements in the ever
      changing infrastructure marketplace and the current economic landscape. We
      will leverage this feedback to guide the development of new tools and
      content.


·
            Target
      prospects with high lifetime value:We intend to focus our
      marketing efforts toward reaching the prospects that fit a high value
      profile which ultimately leads to higher lifetime value.  Our
      history also shows that organizations with certain firmographic
      characteristics tend to subscribe to the most valuable products and
      services, and have higher client satisfaction.  If we are
      effective in targeting these companies, we expect that retention rates and
      the long-term profitability of our clients will
  improve.







Clients




We
service our clients through two separate business channels:  client
subscriptions and content licenses.  Client subscriptions are sold
directly to the end user of the business intelligence.  At December
31, 2008, we had approximately 8,400 subscribing clients. Client
subscriptions contributed approximately 86% of our revenue in 2008 and 2006 and
85% in 2007.  The annual contract value of client subscribers was
approximately $19.8 million, $17.6 million and $15.5 million at December 31,
2008, 2007 and 2006.





Our
second business channel, content licenses, represents clients who resell our
business intelligence to their customers.  These clients represented
approximately 11%, 12% and 13% of our revenue in 2008, 2007 and
2006.  The annual contract value of our content license clients was
approximately $2.2 million, $2.4 million and $2.1 million at December 31, 2008,
2007 and 2006.





We also
generate revenue from fees charged for one-time management reports, document
download services, and list rental services; these fees represented a combined
3% of revenue in 2008 and in 2007 and 1% in 2006.




5


Sales
Strategy




The
primary objectives of our sales strategy are to increase annual contract value
and client retention and to reduce the cost of client acquisition and
support.  Our sales strategy is to:


·
            Increase
      the specialization of account management resources (by vertical and
      segment) and reduce the number of accounts each representative manages to
      deliver greater client service and increase client satisfaction;
      and


·
            Increase
      the efficiency and predictability of the acquisition team by shortening
      the potential project discovery process through consistent and proactive
      prequalification of prospects and selective targeting of ideal prospects
      that do business in verticals served within our product
      offering.





Our 2009
sales strategy also has strong emphasis on performance management processes
around forecasting, managing activities, and prioritizing activity around at
risk clients.




Marketing
Strategy




We deploy
an integrated approach to marketing by incorporating email direct marketing,
online search engine marketing, event marketing, public relations, and by
supporting sales tools and collateral.  Client retention and upgrade
marketing are an integral part of our marketing strategy.  Marketing
programs are intended to keep our name and solutions in front of our clients and
prospective clients in a relevant and meaningful way, through newsletters, new
product updates, government best practice emails, blogs, and personalized
renewal reminders, among others.





In 2008,
we focused our marketing efforts on generating high quality sales leads at the
lowest cost, while providing the sales tools to support high-value
sales.  We refined our online marketing programs and website to drive
more qualified leads from people using search engines to identify revenue
opportunities.  In 2009 lead generation efforts will focus on
increasing efficiency through driving more highly qualified, targeted companies
as leads. We will supplement this effort with more sophisticated client
relationship management, relationship marketing communications, analytics,
tracking and reporting. The 2009 marketing strategy will center on the
challenging economic climate and the American Recovery and Reinvestment Act of
2009 (the “Federal Government Stimulus”).





Agency
Relationships




Agency
partners bring value through source contributed content and by providing
referrals of their business suppliers. As of December 31, 2008, we had
approximately 400 active partner agencies in key metropolitan areas nationwide.
We continue to sign a variety of government agencies including cities, counties,
housing authorities, transportation authorities and school
districts.





Technology




We
support our operations and business solutions using an advanced technology
platform designed to serve a large and rapidly increasing volume of web traffic
in a reliable and efficient manner without critical failures. Our systems are
designed to:




•
            Provide
      fast, secure and uninterrupted visitor access to our web
    site;




•
            Validate
      and process client requests promptly and
  accurately;




•
            Provide
      timely, comprehensive and accurate management-reporting
      capabilities;




•
            Accommodate
      upgrades to tools and features on our web
site;




•
            Scale
      to accommodate growth in our operations;
and




•
            Provide
      redundancy in case of component system
failures.




6


Our
systems use a combination of proprietary technologies and commercially available
licensed technologies. The backbone of our technology infrastructure consists of
database servers running Microsoft SQL Server 2000 on HP/Compaq hardware. The
front end consists of multiple, redundant web servers that are expandable as
operations grow.




Our web
servers, database servers, transaction-processing servers and other core systems
that conduct essential business operations are housed at a third-party offsite
co-location facility. Our co-location vendor provides 24x7 monitoring and
engineering support in a climate-controlled and physically secure environment
and our network operations personnel have 24x7 access to the facility. Our data
center has redundant communication lines from multiple Internet service
providers and has its own emergency power and backup systems. We house all
non-critical systems such as development servers, quality assurance servers, and
internal network servers at our headquarters in Seattle.




In
addition to maintaining responsibility for the technical architecture, security
and uptime of our business solutions, our technology department works closely
with the sales and marketing departments to ensure that client feedback for new
features is incorporated into new products and services.




Competition




The
market for comprehensive intelligence on the infrastructure marketplace is
underserved. Competitors include, to a limited extent, bid aggregators, industry
analysts and government e-procurement platforms.





Our
current and potential competitors include, but are not limited to, the
following:





•
            Information
      companies that target specific verticals also covered by our services,
      such as McGraw-Hill, Contractors Register and Input;
  and


•
            Lead
      generation and bid matching companies such as FedMarket.com, BidNet and
      GovernmentBids.com.





We may
face additional competition in the future as well-funded companies pursue new
government procurement and private sector database products and services. We
must differentiate ourselves by expanding our database, developing products and
services with high switching costs, and maintaining a loyal base of repeat
clients.  To achieve this we must continually enhance our content and
sources, and provide our clients with relevant, customized views of our database
to achieve these objectives.





We
believe that the principal competitive factors affecting our market include, but
are not limited to, breadth, depth and timeliness of content, content quality,
base of existing clients, and client service. In order to excel at these
principal competitive factors, we strive to achieve a superior understanding of
our clients, offer greater value in content and services and sustain a more
efficient operating model. We also mitigate some potential competitive pressures
by selling our content to some competitors for redistribution to their clients.
We believe that the current database offering compares favorably to select
offerings available in the marketplace today based on the depth and history of
our information, breadth of content types, and daily updates.




Seasonality




New
client acquisition is subject to some modest seasonal fluctuations. The third
quarter has historically been our slowest quarter for new client acquisition.
The construction industry is our single largest market and historically these
prospects are fulfilling contracts during the summer months and not prospecting
for new work, which causes acquisition of new clients to be slower in the summer
months. For this reason, it may not be possible to compare the performance of
our business by consecutive quarters, and our quarterly results should be
considered on the basis of results for the whole year or by comparing results in
a quarter with the results in the same quarter for the previous
year.




Intellectual
Property Rights




Our
future success depends in part on intellectual property rights, proprietary
rights, and technology.  We rely on a combination of copyright,
trademark and trade secret laws, employee and third-party nondisclosure
agreements and other methods to protect our proprietary rights. We seek to
protect our internally developed products, documentation, and other written
materials under trade secret and copyright laws, which afford only limited
protection. We cannot ensure that any of our proprietary rights will be viable
or of value in the future since the validity, enforceability and type of
protection of proprietary rights in Internet-related industries is uncertain and
still evolving.




We
license and will continue to license certain products integral to services from
third parties, including products that are integrated with internally developed
products and used jointly to provide key content and services. These third-party
product licenses may not continue to be available on commercially reasonable
terms and we may not be able to successfully integrate such third-party products
into our solutions.




7


We
presently have no issued U.S. patents and we have one U.S. patent application
pending.  We filed a U.S. patent application for Onvia Business
Builder product in 2006.  It is possible that we may not develop
future proprietary products or technologies that are patentable and that the
patents of others will seriously harm our ability to do business.




We own
the following registered trademarks in the U.S. Patent and Trademark
Office:  ONVIA, ONVIA and Design (current logo with orange
circular design), ONVIA DOMINION, DEMANDSTAR, DEMANDSTAR.COM, QUOTEWIRE,
BIDWIRE, and E-JOURNAL OF COMMERCE. The Company also owns the
following registered trademarks in Canada: ONVIA, ONVIA.COM, and ONVIA.COM and
Design.




Employees




As of
March 1, 2009, we had 173 employees working in the following departments: 90 in
sales and marketing, 51 in research, which are included in cost of sales, 20 in
technology and development and 12 in general and administrative.




None of
our employees are represented by a union or collective bargaining agreement. We
have never had a work stoppage and consider relations with our employees to be
good.





Geographic
Financial Information





During
the years ended December 31, 2008, 2007 and 2006, all of our revenues were
generated from clients located in the United States.  All of our long
lived assets are located in the United States.





Available
Information




We file
with and furnish to the Securities and Exchange Commission, or SEC, periodic
reports, including annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, proxy and information statements, and other
information, along with amendments to such reports. Our SEC filings are posted
on the SEC’s Web site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. Materials that we file
with the SEC are also available at the SEC’s Public Reference Room at 100 F
Street, NE, Room 1580, Washington, DC 20549. Information regarding the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Our annual report on Form 10-K, along with all other reports and
amendments filed with or furnished to the SEC are available on the “About Onvia”
section of our website at www.onvia.com as soon as
reasonably practicable after we have filed them with, or furnish them to, the
SEC.







ITEM 1A.
            RISK
      FACTORS




In
addition to other information in this Report, the following risk factors should
be carefully considered in evaluating our business because such factors may have
a significant impact on our business, results of operations and financial
condition and could cause our stock price to decline. As a result of the risk
factors set forth below and elsewhere in this Report, and the risks discussed in
our other Securities and Exchange Commission filings, actual results could
differ materially from historical results or those projected in any
forward-looking statements.







Risks
related to our growth strategy




Weakness
in the U.S. economy and in the commercial-residential housing market
specifically, could drive reduced spending by our clients and prospective
clients on business intelligence services.





The
majority of our clients are small to medium sized businesses operating within
the infrastructure verticals, which include industries that are negatively
impacted by a slowdown in the commercial and residential development market,
such as building & construction and architecture &
engineering.  Broad economic downturns typically have a greater impact
on small and medium sized businesses than on larger entities. The economic
downturn in these industries could cause our clients and prospective clients to
reduce their spending on market intelligence, which would slow our revenue
growth.





Continued
weakness in the U.S. economy may negatively impact our client retention
rates.





The
current economic slowdown is far-reaching and is having severe adverse impacts
on businesses of all sizes.  Many smaller, less capitalized businesses
have already failed.  If the downturn persists it is possible that
this will extend to larger better capitalized businesses as well.  If
a significant number of our existing clients were to fail, or to cut back on
operating expenses by eliminating services perceived as non-essential, our
client retention rates would be adversely impacted, which would slow our revenue
growth.





8


We
may not be able to meet projected renewal rates.




Our
ability to continually enhance our products and services to provide relevant
information to our clients, appropriately classify and distribute information,
provide excellent client service, maintain competitive pricing and meet our
clients’ expectations for source coverage and new content will significantly
impact their satisfaction with our products and services and will impact their
decision to renew. If we are unable to meet our clients’ expectations, renewal
rates and projected growth and profitability will suffer.





We
may be required to increase sales and marketing expenses in order to achieve
revenue goals.





During
2007 and 2008, we directed significant resources toward the development of our
website, which we believe will generate a significant portion of sales leads in
the future.  If our improved website or other existing or planned
marketing initiatives do not drive sufficient sales leads, we may be required to
increase spending on new and untested marketing initiatives to deliver adequate
leads to our sales team in order to achieve revenue goals, and our operating
results may suffer.





Achieving
our sales goals also depends in part on increasing the number of new clients
generated by our acquisition sales team.  We plan to increase new
client acquisition by improving the productivity of each of our sales
representatives through performance management and by delivering more highly
qualified leads through our marketing efforts.  We have hired new
sales leadership and plan to invest in new sales tools to increase productivity;
however, if we do not achieve the desired productivity increases, we may be
required to increase headcount to a greater extent than planned, which would
increase operating expenses and may adversely impact operating
results.





We
may not be able to increase subscribership to high value products.




We expect
that a significant portion of future growth will come from increasing annual
contract value per client, and we expect this to be driven by increased adoption
of our high value products.  Subscribers to our high value products
have higher annual contract value, higher renewal rates and provide greater
lifetime value to us. Failure to increase subscribership to these products would
limit our future growth and adversely affect our results of operations.




We
may not achieve projections for adoption of new products by new and existing
clients.





We made
significant investments in 2008 to expand our database and develop the Onvia
Planning and Construction product. We plan to launch additional content and
tools in 2009 and beyond.  We expect to see an increase in retention
rates for existing clients and an increase in new customer acquisition because
of the added features in these new products and tools.  Adoption of
these products by new and existing clients may not be consistent with our
estimates, which would adversely impact client metrics and future
growth.





We
may fail to attract, hire and retain sales associates who can effectively
communicate the benefits of our products to  our clients and
prospects, and they may be unable to achieve expected sales
targets.




In order
to achieve projected revenue growth rates, our sales teams must be able to
effectively communicate the benefits of our products to existing and potential
clients. We expect to see increases in client retention rates and in new client
acquisition revenue and our sales goals are aggressive. If we are unable to
retain current sales associates and attract and hire new sales associates with
the appropriate skills, we may not be able to achieve projected sales targets
and revenue growth rates.




If
we cannot effectively satisfy clients across all targeted industry verticals, we
may decide to target fewer industries, and as a result, may lose
clients.




If we
find that retention and acquisition rates in any of our focused verticals are
not meeting expectations due to lack of bid-flow or for other reasons, we may
choose to specialize in fewer industry verticals to improve client satisfaction
and retention in the remaining verticals. As a result, we may lose clients in
the non-core verticals. A more targeted focus on these core verticals may not
generate the expected level of increased retention and acquisition.




Our
competitors may develop similar technologies that are more broadly accepted in
the marketplace.





The
functionality in Onvia Business Builder and Onvia Planning and Construction is
robust, and we expect that if adoption of these tools is in line with our
expectations that competitors may introduce products with similar
functionality.  If competitors introduce products with similar
functionality or are able to more effectively market and price their products
for broad customer acceptance, new client acquisition and existing client
retention would be adversely impacted.  If we are unable to enhance
functionality or increase marketing efforts to offset challenges from
competitors, we may lose market share.





9


Rapid
advances in technology and new mediums for distributing information may diminish
the value of our service offerings





Our
business model is predicated on providing low cost access and analysis of hard
to find public and private sector information.  Information in general
is quickly becoming more accessible at a low cost as new distribution mediums,
such as blogs, and new search technologies are developed. We may be unable to
keep up with the rapid advances in information collection, and new technologies
and mediums may be developed that commoditize the value of our
services.  If this were to occur, our revenues would
suffer.








Risks
related to our new product strategy





We
may fail to introduce new content and products that are broadly accepted by
clients, and there may be delays in the introduction of these tools and
products.




We expect
to introduce new content in 2009 that will complement our current suite of
products.  If client acceptance and adoption of these new products is
below our expectations, projected growth rates and client acquisition and
retention goals may not be achieved, and financial results would be harmed. We
expect to utilize internally developed technology and technology licensed from
third parties for the development of new tools and content. If we are unable to
develop or acquire the required technology on time, or at all, or if the launch
of these new products is delayed for any other reason beyond our anticipated
launch dates, projected growth rates may not be achieved.




We
may be unable to control the cost of ongoing content collection or the cost of
collecting new content types to support new product offerings.





We
continue to adopt more efficient content collection methods, which allow us to
increase our content collection without significantly increasing our cost of
revenue.  We will need to identify cost effective sources and develop
efficient collection processes for new content types required to support new
product development plans.  If we are unable to find new ways to
collect content efficiently, and aggregate new content types in a cost effective
manner, gross margins may decline.




We
have invested significant capital into new product development, and if the new
applications fail to meet expectations, we may not achieve our anticipated
return on these investments.





Onvia
Planning and Construction was launched in February 2008 and we expect to
generate a significant return on this investment.  We expect to launch
additional new products in 2009 including a comprehensive new user interface
that combines access to our public sector and private sector
databases.  If adoption of these and other new product offerings is
not consistent with our expectations, we will not see the expected return on
these investments.





We
may improperly price new product offerings for broad client
acceptance.





We plan
to implement price increases with respect to some of our existing products in
2009.  We have developed pricing strategies for our existing products,
and will be required to develop new pricing strategies for planned new product
launches.  If existing clients do not perceive that the pricing of our
products is commensurate with the value they receive from the products, or if
our sales staff is unable to communicate the value of the products, particularly
in light of the current economic climate, new client adoption and existing
client retention would be adversely impacted.





We
may overestimate the value of sales intelligence to companies in the
infrastructure marketplace.





We
believe there is a large unmet market need for robust public and private sector
sales and marketing information.  Our business model assumes that
clients will pay an annual fee for this information and we expect increases in
the annual value of these contracts in the near-term and
long-term.  If we have overestimated the value of this information, we
will not achieve our forecasted revenue goals.





10


Financial,
economic and market risks





We
may not be able to generate positive cash flows from operations.




In 2008,
positive cash flow was not generated due to significant investments in new
applications and our database platform. 2007 represented the first year in our
history that positive cash flow from operations was generated for every quarter,
except the third quarter due to seasonal fluctuations, and for the full year.
Due to these seasonal fluctuations and limited performance history on client
adoption of new products, we may not be able to achieve positive cash flow from
operations in the near-term.




Our
quarterly financial results are subject to fluctuations that may make it
difficult to forecast future performance.




We have
experienced some seasonal fluctuations in our business, reflecting a combination
of seasonal trends for the services and products we offer, as well as seasonal
trends in the buying habits of target business clients and government agencies.
Operating results may continue to vary significantly from quarter to quarter,
making it difficult to formulate meaningful comparisons of results between
quarters. Our limited operating history and evolving business model further
contribute to the difficulty of making meaningful quarterly comparisons. A
significant portion of our subscription revenue for a particular quarter is
derived from transactions that are initiated in previous quarters, because
revenue is recognized ratably over the subscription term.




Our
current and future levels of operating expenses and capital expenditures are
based largely on our growth plans and estimates of future revenue. These
expenditure levels are, to a large extent, fixed in the short term. We may not
be able to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall, and any significant shortfall in revenue relative to planned
expenditures could harm our business and results of operations.




We
implemented anti-takeover provisions that may discourage takeover attempts and
depress the market price of our stock.




Provisions
of our certificate of incorporation and bylaws, as well as provisions of
Delaware law, the state of our incorporation, can have the effect of making it
difficult for a third-party to acquire us, even if doing so would be beneficial
to the our stockholders. These provisions include:




•
            the
      classification of our Board of Directors into three classes so that the
      directors serve staggered three-year terms, which may make it difficult
      for a potential acquirer to gain control of our
  Board;




•
            authorizing
      the issuance of shares of undesignated preferred stock without a vote of
      stockholders; and




•
            non-cumulative
      voting for the election of
directors.




In
addition, in 2002, our Board of Directors adopted a Stockholders Rights
Agreement, designed to protect stockholder interests in the event of an
unsolicited takeover attempt by distributing one preferred stock purchase right
for each outstanding share of common stock.  The Rights Agreement may
make it more difficult for a third-party to acquire us.








Operational
risks




We
may not effectively implement new technologies and new product functionality
could fail to perform as designed.





We
periodically release products that employ new search technologies and complex
database architecture in new and innovative ways.  These technologies
are usually built in house, or purchased from third party vendors and
reengineered to meet our operational needs.  If the creative
application of these technologies does not work as planned or if we implement
these new technologies poorly or in incompatible ways, our new products and
services may not function properly, delivery of our products could be disrupted
or delayed and our client retention and new client acquisition may
suffer.





System
failures could cause an interruption in the services of our network and impact
our ability to compile information and deliver our products to
clients.




Any
system failure that causes an interruption in the service of our suite of
products, disrupts our ability to aggregate, organize and publish new content,
or reduces timely access to and delivery of our content could result in client
dissatisfaction, which would impact client acquisition and retention
rates.  Further, prolonged or ongoing performance problems on our web
sites or our application servers, which support bid creation and distribution,
could damage our reputation and result in the permanent loss of clients. In the
past, system interruptions have made our web sites and application servers
totally unavailable, slowed their response time or prevented us from making
service available to clients, and these problems may occur again in the
future.




We may
not have sufficient business interruption insurance to cover losses from major
interruptions. We deployed our primary business application servers to a secure
offsite facility with backup utility power and redundant Internet connectivity
in 2008. Our current disaster recovery systems are designed to ensure that a
portion of our Information Technology and Research department functions will be
operational in the event of a local building disaster so that delivery of our
products will not be significantly interrupted. Our disaster recovery plan is
not yet finalized to include automated failover of product distribution-related
systems, requiring some manual intervention to complete the failover process
which could results in prolonged service interruptions and ultimately lower
client satisfaction.




11


Our
current technology infrastructure and network software systems may be unable to
accommodate our anticipated growth, and we may require a significant investment
in these systems to accommodate performance and storage requirements of new and
planned products.





Our new
Onvia Planning and Construction product, expansion of historical content
contained in Onvia Dominion database and future product offerings have and will
place significant additional demands on the network and on our
database.  We add thousands of records to our database each day, which
has required us to expand the storage capacity of the database.  If
new content types or product introductions change current network and database
requirements or if growth in client base exceeds our expectations, we may be
required to make significant investments to upgrade our systems to accommodate
such changes, which could negatively impact our cash flows and results of
operations. We may not be successful in our efforts to upgrade our systems, or
if we do successfully upgrade our systems, we may not do so on time and within
budget. Failure to achieve a stable technological platform in time to handle
increasing network traffic may discourage potential clients from using our
network.





We
may not be able to retain the services of our executive officers, directors,
senior managers and other key employees, which would harm our
business.




Our
business and operations are substantially dependent on the performance of senior
management, directors and key employees. The loss and inability to replace any
of these employees or directors would likely harm our business.





Political,
social or environmental conditions in off-shore locations may impact the
collection and delivery of our content and/or development of new
products.




Portions
of our content are aggregated and/or formatted by off-shore
vendors.  Delivery of that content may be impacted by local political,
social or environmental conditions, which may result in delayed delivery to
clients resulting in client dissatisfaction.





We also
outsource portions of the development of new products to off-shore
vendors.  Political, social or environmental conditions in those
locations may result in delays of new product introductions.




We  may
be unable to effectively monitor and prevent unauthorized redistribution of our
published information.




In the
past we have identified a number of entities that have redistributed proprietary
information without authorization and against our terms of use. We have been and
will continue to be aggressive about monitoring and combating such unauthorized
use, and are considering technological avenues for blocking such users from our
database. However, if we fail to effectively combat such unauthorized use, our
business could be harmed.





Our services and
products depend upon the continued availability of licensed technology from
third parties, and we may not be able to obtain those licenses on commercially
reasonable terms, or at all.





We
license, and will continue to license, technology integral to our services and
products from third parties. If we are unable to acquire or retain key
third-party product licenses or integrate the related third-party products into
our network services, our service and product development may be delayed. We
also expect to acquire new licenses in the future as our business grows and
technology evolves. we may not be able to obtain these licenses on commercially
reasonable terms, or at all.




Increased
blocking of our emails could negatively impact client satisfaction with our
products and could inhibit the effectiveness of our marketing
efforts.




Portions
of our content are currently delivered in the form of an attached file via
email. Some network administrators could flag and block emails from us due to
increased filtering of email attachments as a result of the threat of email
borne viruses or unwanted “spam” or for other reasons. We also conduct marketing
campaigns to our customer base and occasionally these campaigns are done via
email.  Excessive filtering of our emails could negatively impact
client satisfaction and could inhibit our marketing efforts.





12




Regulatory,
judicial or legislative risks




Any
settlement or claim awarded against us in our ongoing litigation matters could
negatively impact operating results.




We are
defending against the litigation matters as detailed in the legal proceedings
section in Item 3 of Part I of this Report. We have directors and officers
insurance of $30 million that would cover defense costs and any award or
settlement, less a deductible of $250,000, in the securities class action
suit.  While we believe we have a strong defense in this case, we
cannot be certain that the outcome of the case will be favorable to us. A
settlement or award in this or other potential suits could negatively impact our
operating results. It is also possible that defense of this and future claims
may result in a significant diversion of management attention.




Future
regulations could be enacted that either directly restrict our business or
indirectly impact our business by limiting the growth of
e-commerce.




We are
subject to laws and regulations governing the Internet and e-commerce. These
laws and regulations may cover privacy, content, taxation, data protection
copyrights, electronic contracts and other communications, consumer protection,
unencumbered Internet access to our services, the design and operations of
websites, and the characteristics and quality of products and services. If
enacted, unfavorable laws and regulations could limit the market for our
services and offerings. Although many regulations might not apply to the
business directly, we expect that laws regulating the collection or processing
of personal or consumer information could indirectly affect our business. It is
possible that legislation could expose companies involved in e-commerce to
restrictions or liability, which could limit the growth of e-commerce generally.
Legislation could hinder the growth in Internet use and decrease our acceptance
as a medium for communication and commerce.  If laws were enacted that
made our products taxable at the state level, we may be required to pass those
additional taxes along to our customers, which would increase the overall cost
of our product to our end users and could impact the buying decisions of
existing and potential new clients.




Our
access to new content from governmental entities and other third parties may be
restricted if bid aggregation on the Internet is restricted by law or
regulations.




We
aggregate new information from various public data sources and do not have
exclusive access to this content.  We cannot ensure that these data
sources will continue to be available in the future. Moreover, public disclosure
laws, which require governmental entities to produce bid information directly to
members of the public, may negatively impact our business and reduce the value
of our services to clients. The loss or the unavailability of data sources in
the future, or the loss of right to distribute some of the data sources, would
harm our business.





Our
proprietary bid aggregation technology is integral to our success. If the
process of bid aggregation becomes regulated in the future and our process for
acquiring government bids is no longer cost-effective, our business will be
significantly harmed. If new regulations restricting our ability to charge a fee
for public bid information are enacted, our business will be significantly
harmed.





Utilization of
our net operating loss, or NOL, carryforwards may be subject to annual
limitations provided by the Internal Revenue Service code.





We have substantial net operating loss
carryforwards that could be used to offset future tax liabilities once we begin
to generate taxable income.  Utilization of these NOLs may be subject
to a substantial limitation due to ownership change limitations provided by
Section 382 of the Internal Revenue Code of 1986, which may limit the amount of
NOL carryforwards that can be utilized annually to offset future taxable income
and tax, respectively.  Limitations on the utilization of these NOLs
could adversely impact future operating results and cash flows.





ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS





None.





13





ITEM 2.
            PROPERTIES




Our
headquarters are located in Seattle, Washington.  Beginning January 7,
2008, we relocated our corporate headquarters and we now lease approximately
35,000 square feet in two floors of a sixteen-story office complex located at
509 Olive Way, Seattle, Washington.  Prior to this, we leased 29,785
square feet in two floors of a four-story office complex in our former corporate
headquarters building. We believe the new space is adequate to meet current and
near term capacity requirements.  The lease on this new office space
expires in October 2015.





Concurrent
with the new lease, we entered into a termination agreement with Blume Yale
Limited Partnership to terminate the lease on our former corporate headquarters
located at 1260 Mercer Street, Seattle, Washington.  Termination of
the Mercer Street lease was effective January 11, 2008.  Subsequent to
this termination, we have no further obligation on that space.







ITEM 3.
            LEGAL
      PROCEEDINGS




Class Action Securities
Litigation





In 2001,
five securities class action suits were filed against us, certain former
executive officers, and the lead underwriter of our initial public offering
Credit Suisse First Boston, or CSFB.  The suits were filed in the U.S.
District Court for the Southern District of New York on behalf of all persons
who acquired our securities between March 1, 2000 and December 6, 2000.  In
2002, a consolidated complaint was filed.  The complaint charged defendants
with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 (and Rule 10b-5 promulgated thereunder) and Sections 11 and 15 of the
Securities Act of 1933, for issuing a Registration Statement and Prospectus that
failed to disclose and contained false and misleading statements regarding
certain commissions purported to have been received by the underwriters, and
other purported underwriter practices in connection with their allocation of
shares in the offering.  The complaint sought an undisclosed amount of
damages, as well as attorneys’ fees.  This action is being coordinated with
approximately 300 other nearly identical actions filed against other
companies.




On
December 5, 2006, the court of appeals for the second circuit vacated a decision
by the district court granting class certification in six of the coordinated
cases, which are intended to serve as test, or “focus,” cases.  The
plaintiffs selected these six cases, which do not include Onvia.  On April
6, 2007, the Court of Appeals denied a petition for rehearing filed by the
plaintiffs, but noted that the plaintiffs could ask the district court to
certify more narrow classes than those that were rejected.  On August
14, 2007, the plaintiffs filed amended complaints in the six focus
cases.  On September 27, 2007, the plaintiffs moved to certify classes
in the six focus cases.  The six focus case issuers and the underwriters
named as defendants in the focus cases filed motions to dismiss the amended
complaints against them.  On March 26, 2008, the district court dismissed
the Section 11 claims of those members of the putative classes in the focus
cases who sold their securities for a price in excess of the initial offering
price and those who purchased outside the previously certified class
period.  With respect to all other claims, the motions to dismiss were
denied.  On October 10, 2008, at the request of the plaintiffs, the
plaintiffs’ motion for class certification was withdrawn, without
prejudice.




The
parties in the approximately 300 coordinated class actions, including us, the
underwriter defendants in our class action, and the plaintiffs in the class
action, have reached an agreement in principle under which the insurers for the
issuer defendants in the coordinated cases will make the settlement payment on
behalf of the issuers, including us. The settlement is subject to approval by
the parties, termination by the parties under certain circumstances, and Court
approval.  There is no assurance that the settlement will be concluded
or that the Court will approve the settlement.




Due to
the inherent uncertainties of litigation, we cannot accurately predict the
ultimate outcome of this matter.   If the settlement is not concluded
or approved and we are found liable, we are unable to estimate or predict the
potential damages that might be awarded, whether such damages would be greater
than our insurance coverage, and whether such damages would have a material
impact on our results of operations or financial condition in any future
period.






14


On
October 2, 2007, Vanessa Simmonds, a purported stockholder of Onvia, filed suit
in the U.S. District Court for the Western District of Washington against Credit
Suisse Group, JPMorgan Chase & Co. and Bank of America Corporation, the lead
underwriters of the our initial public offering in March 2000, alleging
violations of Section 16(b) of the Securities Exchange Act of 1934. The
complaint alleges that the combined number of shares of the Company's common
stock beneficially owned by the lead underwriters and certain unnamed officers,
directors, and principal stockholders exceeded ten percent of its outstanding
common stock from the date of our initial public offering on March 2, 2000,
through at least February 28, 2001. It further alleges that those entities and
individuals were thus subject to the reporting requirements of Section 16(a) and
the short-swing trading prohibition of Section 16(b), and failed to comply with
those provisions. The complaint seeks to recover from the lead underwriters any
"short-swing profits" obtained by them in violation of Section 16(b). We were
named as a nominal defendant in the action, but has no liability for the
asserted claims. No directors or officers were named as defendants in this
action. On October 29, 2007, the case was reassigned to Judge James L. Robart
along with fifty-four other Section 16(b) cases seeking recovery of short-swing
profits from underwriters in connection with various initial public offerings.
On February 25, 2008, Ms. Simmonds filed an Amended Complaint asserting
substantially similar claims as those set forth in the initial complaint. On
July 25, 2008, we joined with 29 other issuers to file the Issuer Defendants'
Joint Motion to Dismiss. Underwriter Defendants also filed a Joint Motion
to Dismiss on July 25, 2008. Plaintiff filed oppositions to both motions on
September 8, 2008. On March 12, 2009, the court granted the Issuer Defendants'
Joint Motion to Dismiss, dismissing the complaint without prejudice on the
grounds that  Ms. Simmonds had failed to make an adequate demand on us
prior to filing her complaint.  In its order, the court stated it would not
permit plaintiff to amend her demand letters while pursuing her claims in the
litigation.  Because the court dismissed the case on the ground that
it lacked subject matter jurisdiction, it did not specifically reach the issue
of whether plaintiff's claims were barred by the applicable statute of
limitations.  However, the court also granted the Underwriters' Joint
Motion to Dismiss with respect to cases involving non-moving issuers,
holding that the cases were barred by the applicable statute of limitations
because the issuers' shareholders had notice of the potential claims more
than five years prior to filing suit.  It is not clear at this time whether
the plaintiff intends to appeal the dismissal of her claims.   We
believe that the outcome of this litigation will not have a material adverse
impact on our consolidated financial position and results of
operations.




Potential Future
Litigation





In
addition, from time to time the Company is subject to various other legal
proceedings that arise in the ordinary course of business. While management
believes that the disposition of these matters will not have a material adverse
effect on the financial position, results of operations, or cash flows of the
Company, the ultimate outcomes are inherently uncertain.








ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS




No
matters were submitted to a vote of security holders during the fourth quarter
ended December 31, 2008.




EXECUTIVE
OFFICERS OF THE REGISTRANT





The
executive officers of the Company are as follows:





Name
                    Age
                    PositionMichael
      D. Pickett
                    61
                    Chief
      Executive Officer, President and Chairman of the BoardIrvine
      N. Alpert
                    57
                    Executive
      Vice PresidentEric
      T. Gillespie
                    40
                    Senior
      Vice President, Products, Technology and InformationMichael
      J. Tannourji
                    41
                    Senior
      Vice President, SalesMichael
      S. Balsam
                    40
                    Chief
      Solutions OfficerCameron
      S. Way
                    37
                    Chief
      Financial
Officer





Michael D. Pickett has served
as director of the Company since February 1999, as Chief Executive Officer and
Chief Executive Officer and Chairman of the Board of the Company from February
1999 to August 2000 and since April 2001, and as President since September 2004.
Mr. Pickett also served as President and Chief Operating Officer of the Company
from August 2000 to April 2001. From July 1999 to August 2000, Mr. Pickett
served as Chief Executive Officer of Hardware.com, Inc., an online source for
total home improvement solutions, which was acquired by the Company in September
2000. From July 1997 to March 1999, Mr. Pickett was Chairman and Chief Executive
Office of Technology Solutions Network, LLC, a provider of turnkey technology
solutions for small businesses. From October 1983 to February 1996, Mr. Pickett
served in a variety of positions and most recently as Chairman, Chief Executive
Officer, and President of Merisel, Inc., a wholesale distributor of computer
hardware and software products and a provider of logistics
services.





Irvine N. Alpert has served
as Executive Vice President of the Company since July 2001. From February 1995
to July 2001, Mr. Alpert was the founder and Chief Executive Officer of
ProjectGuides, Inc., an architecture, engineering, and construction market
information service, which was acquired by Onvia in June 2001. From 1993 to
1995, Mr. Alpert served as President of RCI Environmental, Inc., a regional
construction company.





15


Eric T. Gillespie has served
as Senior Vice President, Products, Technology and Information of the Company
since July 2008. Prior to becoming Senior Vice President, Mr. Gillespie served
as Chief Information Officer of the Company since May 2007. From October 2004 to
May 2007 Mr. Gillespie served as Executive Vice President and Chief Operating
Officer of The Patent Board, a provider of best practices research tools and
metrics for patent analysis and intellectual property investment. From October
1999 to October 2004, Mr. Gillespie served as Vice President, Managing Director
of SBI Group, formerly Scient, a technology strategy and services
firm.





Michael J. Tannourji has
served as Senior Vice President, Sales of the Company since November
2007.  From May 2005 to September 2007, Mr. Tannourji served as Vice
President National Sales & Service BIS of Experian, Inc., a global
information services company.  From January 2004 to December 2004, Mr.
Tannourji served as Vice President/Leader Vertical Markets, and from September
1999 to December 2003, Mr. Tannourji served as Assistant Vice President Global
& Major Customers, of Dun & Bradstreet, a global information services
company.





Michael S. Balsam has served
as Chief Solutions Officer of the Company since November 2008. Prior to becoming
Chief Solutions Officer, Mr. Balsam served as Vice President of Products and
Services of the Company since January 2005 and as Director of Product Management
since November 2002. From June 2001 to November 2002, Mr. Balsam served as a
Product Marketing Manager with the Company.





Cameron S. Way has served as
Chief Financial Officer of the Company since April 2008. Mr. Way served as Chief
Accounting Officer of the Company from June 2005 to April 2008, Controller from
September 2001 to June 2005, Assistant Controller from December 2000 to
September 2001, and finance manager from August 1999 to December 2000. Mr. Way
was an audit manager with PricewaterhouseCoopers LLP from January 1999 to August
1999 prior to joining the Company.





There are
no family relationships between any directors or executive officers of the
Company.


16


PART
II




ITEM 5.
            MARKET
      FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES




Market
Information




Our
common stock trades on the NASDAQ Global Market under the symbol “ONVI.” The
table below lists the high and low closing prices per share of our common stock
for each quarterly period during the past two fiscal years as reported on the
NASDAQ Global Market.





Closing
      Price Rangeof
      Common StockHigh
                      
                      
                      LowYear
      ended December 31, 2007First
      Quarter
                      
                      $
                      7.08
                      
                      
                      $
                      5.90Second
      Quarter
                      
                      
                      8.57
                      
                      
                      
                      6.85Third
      Quarter
                      
                      
                      9.05
                      
                      
                      
                      7.85Fourth
      Quarter
                      
                      
                      8.78
                      
                      
                      
                      7.83Year
      ended December 31, 2008First
      Quarter
                      
                      $
                      8.42
                      
                      
                      $
                      6.43Second
      Quarter
                      
                      
                      6.68
                      
                      
                      
                      5.03Third
      Quarter
                      
                      
                      5.00
                      
                      
                      
                      4.15Fourth
      Quarter
                      
                      
                      4.50
                      
                      
                      
                      3.14




Holders




As of
March 1, 2009, there were approximately 495 holders of record of Onvia common
stock. The number of recordholders was determined from the records of the
Company’s transfer agent and does not include the number of persons whose stock
is held in nominee or “street name” accounts through brokers.




Securities
Authorized for Issuance under Equity Compensation Plans




We
currently maintain three compensation plans that provide for the issuance of our
common stock to officers, directors, employees, and consultants.  We
also have outstanding options under the Amended and Restated 1999 Stock Option
Plan, or the 1999 Plan, and outstanding warrants issued in 1999. On September 5,
2008, our stockholders approved the amendment and restatement of the 1999 Plan,
as the Onvia, Inc. 2008 Equity Incentive Plan, or the 2008 Plan. The three
active compensation plans consist of the 2008 Plan, the 2000 Directors’ Stock
Option Plan, or Directors’ Plan, and the 2000 Employee Stock Purchase Plan, or
ESPP, all of which have been approved by stockholders.  The following
table sets forth information regarding outstanding options and shares reserved
for future issuance under the 2008 Plan, the 1999 Plan, the Directors’ Plan, and
the ESPP as of December 31, 2008.





Plan
      category
                                  
                                  Number
      of securities to be issued upon exercise of outstanding options and
      warrants
                                  
                                  
                                  Weighted
      average exercise price of outstanding options and warrants
                                  
                                  
                                  Number
      of securities remaining available for future issuanceEquity
      compensation plans approved by security holdersOnvia,
      Inc. 2008 Equity Incentive Plan
                                  
                                  
                                  21,350
                                  
                                  
                                  $
                                  3.70
                                  
                                  
                                  
                                  387,993Amended
      and Restated 1999 Stock Option Plan
                                  
                                  
                                  1,841,032
                                  
                                  
                                  
                                  7.32
                                  
                                  
                                  
                                  -2000
      Directors' Stock Option Plan
                                  
                                  
                                  54,000
                                  
                                  
                                  
                                  49.75
                                  
                                  
                                  
                                  -Employee
      Stock Purchase Plan
                                  
                                  
                                  -
                                  
                                  
                                  
                                  N/A
                                  
                                  
                                  
                                  419,385Total
                                  
                                  
                                  1,916,382
                                  
                                  
                                  $
                                  8.48
                                  
                                  
                                  
                                  807,378




Dividends




No cash
dividends were declared for the years ended December 31, 2008 and 2007 nor does
Onvia have the intention to pay cash dividends in the foreseeable
future.





17


Recent
Sales of Unregistered Securities




None.





Issuer
Purchases of Equity Securities




None.





Stock
Price Performance Graph





The
following graph compares the cumulative total return to stockholders on Onvia’s
common stock during the five years ended December 31, 2008 to the cumulative
total returns on the NASDAQ Composite Index and the AMEX Interactive Week
Internet Index.  The comparison assumes $100 was invested on December
31, 2003 in shares of Onvia’s common stock and in each of the indices
shown.  The stock price performance shown on the following graph is
not necessarily indicative of future performance of Onvia’s common
stock.





18


ITEM 6.                      SELECTED
CONSOLIDATED FINANCIAL DATA




The
following selected consolidated financial data for the fiscal years ended
December 31 should be read in conjunction with the consolidated financial
statements and related notes of Onvia and its subsidiary included in this and
previous Annual Reports on Form 10-K, as well as the section of this and
previous Reports entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Historical results are not necessarily
indicative of future results.


Year Ended December 31,2008
                                                                      
                                                                      
                                                                      2007
                                                                      
                                                                      
                                                                      2006
                                                                      
                                                                      
                                                                      2005
                                                                      
                                                                      
                                                                      2004(in
      thousands, except per share data)Consolidated
      Statements of Operations Data:Revenue
                                                                      
                                                                      $
                                                                      21,142
                                                                      
                                                                      
                                                                      $
                                                                      20,928
                                                                      
                                                                      
                                                                      $
                                                                      16,739
                                                                      
                                                                      
                                                                      $
                                                                      14,714
                                                                      
                                                                      
                                                                      $
                                                                      13,076Gross
      margin
                                                                      
                                                                      
                                                                      16,816
                                                                      
                                                                      
                                                                      
                                                                      17,197
                                                                      
                                                                      
                                                                      
                                                                      13,344
                                                                      
                                                                      
                                                                      
                                                                      11,433
                                                                      
                                                                      
                                                                      
                                                                      11,434Noncash
      stock-based compensation (1)
                                                                      
                                                                      
                                                                      718
                                                                      
                                                                      
                                                                      
                                                                      927
                                                                      
                                                                      
                                                                      
                                                                      1,258
                                                                      
                                                                      
                                                                      
                                                                      84
                                                                      
                                                                      
                                                                      
                                                                      10Idle
      lease accrual and restructuring charges (2)
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      (2,653)
                                                                      
                                                                      
                                                                      
                                                                      (67)
                                                                      
                                                                      
                                                                      
                                                                      1,228
                                                                      
                                                                      
                                                                      
                                                                      916Total
      operating expenses
                                                                      
                                                                      
                                                                      20,623
                                                                      
                                                                      
                                                                      
                                                                      17,685
                                                                      
                                                                      
                                                                      
                                                                      19,840
                                                                      
                                                                      
                                                                      
                                                                      19,095
                                                                      
                                                                      
                                                                      
                                                                      15,827Loss
      from operations
                                                                      
                                                                      
                                                                      (3,807)
                                                                      
                                                                      
                                                                      
                                                                      (488)
                                                                      
                                                                      
                                                                      
                                                                      (6,496)
                                                                      
                                                                      
                                                                      
                                                                      (7,662)
                                                                      
                                                                      
                                                                      
                                                                      (4,393)Net
      (loss) / income before cumulative effect of change in accounting
      principle
                                                                      
                                                                      
                                                                      (3,374)
                                                                      
                                                                      
                                                                      
                                                                      494
                                                                      
                                                                      
                                                                      
                                                                      (5,544)
                                                                      
                                                                      
                                                                      
                                                                      (6,920)
                                                                      
                                                                      
                                                                      
                                                                      (3,900)Net
      (loss) / income
                                                                      
                                                                      $
                                                                      (3,374)
                                                                      
                                                                      
                                                                      $
                                                                      494
                                                                      
                                                                      
                                                                      $
                                                                      (5,544)
                                                                      
                                                                      
                                                                      $
                                                                      (6,920_
                                                                      
                                                                      
                                                                      $
                                                                      (3,900)Unrealized
      gain / (loss) on available-for-sale securities
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      6
                                                                      
                                                                      
                                                                      
                                                                      17
                                                                      
                                                                      
                                                                      
                                                                      8
                                                                      
                                                                      
                                                                      
                                                                      (31)Comprehensive
      (loss) / income
                                                                      
                                                                      $
                                                                      (3,374)
                                                                      
                                                                      
                                                                      $
                                                                      500
                                                                      
                                                                      
                                                                      $
                                                                      (5,527)
                                                                      
                                                                      
                                                                      $
                                                                      (6,912)
                                                                      
                                                                      
                                                                      $
                                                                      (3,931)Basic
      net (loss) / income per common share
                                                                      
                                                                      $
                                                                      (0.41)
                                                                      
                                                                      
                                                                      $
                                                                      0.06
                                                                      
                                                                      
                                                                      $
                                                                      (0.70)
                                                                      
                                                                      
                                                                      $
                                                                      (0.89)
                                                                      
                                                                      
                                                                      $
                                                                      (0.51)Diluted
      net (loss) / income per common share
                                                                      
                                                                      $
                                                                      (0.41)
                                                                      
                                                                      
                                                                      $
                                                                      0.06
                                                                      
                                                                      
                                                                      $
                                                                      (0.70)
                                                                      
                                                                      
                                                                      $
                                                                      (0.89)
                                                                      
                                                                      
                                                                      $
                                                                      (0.51)Basic
      weighted average shares outstanding
                                                                      
                                                                      
                                                                      8,230
                                                                      
                                                                      
                                                                      
                                                                      8,087
                                                                      
                                                                      
                                                                      
                                                                      7,888
                                                                      
                                                                      
                                                                      
                                                                      7,814
                                                                      
                                                                      
                                                                      
                                                                      7,720Diluted
      weighted average shares outstanding
                                                                      
                                                                      
                                                                      8,230
                                                                      
                                                                      
                                                                      
                                                                      8,606
                                                                      
                                                                      
                                                                      
                                                                      7,888
                                                                      
                                                                      
                                                                      
                                                                      7,814
                                                                      
                                                                      
                                                                      
                                                                      7,720


(1)
            Non-cash
      stock-based compensation increased in 2006 as a result of the adoption of
      SFAS 123R on January 1, 2006.


(2)
            The
      net annual reduction in idle lease charges in 2007 represents the
      elimination of the idle lease accrual as a result of the lease termination
      agreement executed by the Company in July 2007.  The impact of
      restructuring charges is also included in Total operating expenses. Refer
      to the discussion under Item 2 above or under Note 9 of the “Notes to the
      Consolidated Financial Statements” for further information on this lease
      termination.


As of December 31,2008
                                      
                                      
                                      2007
                                      
                                      
                                      2006
                                      
                                      
                                      2005
                                      
                                      
                                      2004(in
      thousands, except per share data)Consolidated
      Balance Sheet Data:Cash,
      cash equivalents and short-term investments
                                      
                                      $
                                      13,043
                                      
                                      
                                      $
                                      14,301
                                      
                                      
                                      $
                                      14,435
                                      
                                      
                                      $
                                      20,540
                                      
                                      
                                      $
                                      27,944Long-term
      investments, net of currrent portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,478
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Total
      assets
                                      
                                      
                                      22,323
                                      
                                      
                                      
                                      25,741
                                      
                                      
                                      
                                      23,991
                                      
                                      
                                      
                                      28,635
                                      
                                      
                                      
                                      36,030Idle
      lease accrual, current and long term (1)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      3,779
                                      
                                      
                                      
                                      6,538
                                      
                                      
                                      
                                      7,451Unearned
      revenue, current and long term
                                      
                                      
                                      9,118
                                      
                                      
                                      
                                      9,438
                                      
                                      
                                      
                                      8,840
                                      
                                      
                                      
                                      6,261
                                      
                                      
                                      
                                      6,090Total
      liabilities
                                      
                                      
                                      12,529
                                      
                                      
                                      
                                      13,477
                                      
                                      
                                      
                                      14,396
                                      
                                      
                                      
                                      15,001
                                      
                                      
                                      
                                      15,459Total
      stockholders' equity
                                      
                                      
                                      9,793
                                      
                                      
                                      
                                      12,264
                                      
                                      
                                      
                                      9,595
                                      
                                      
                                      
                                      13,634
                                      
                                      
                                      
                                      20,571





(1)
            The reduction in the
      idle lease accrual from 2006 to 2007 is the result of the lease
      termination agreement executed by the Company in July
      2007.  Refer to the discussion under Note 9 of the “Notes to the
      Consolidated Financial Statements” for further information on this lease
      termination.


19


ITEM 7.                      MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




CAUTIONARY
STATEMENT




The
information set forth in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” below includes “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act, and is subject to the safe harbor created by
those Sections. Factors that could cause results to differ materially from those
projected in the forward-looking statements are set forth in this section and
earlier in this report under Item 1A. “Risk Factors,” beginning on page XX. The
following discussion should also be read in conjunction with the Consolidated
Financial Statements and accompanying Notes thereto.




Introduction





We are a
leading provider of information products and planning tools that help companies
plan, market and sell to targeted markets throughout the United States, or
U.S.  Our information products and planning tools focus on federal,
state, local and educational purchasing entities, and on early stage commercial
and residential infrastructure projects.  Our information products and
planning tools help clients proactively track their competitors, analyze market
trends, and identify new market opportunities.  Marketers can research
government agencies and private sector businesses to effectively establish and
maintain lucrative business relationships.  Our clients can leverage
sales leads from our database in the form of new business prospects, alerts for
upcoming contracting opportunities, and from historical public and private
infrastructure projects to find and win new revenue opportunities. Historically,
comprehensive market intelligence was only available to large companies with the
resources to perform the research and store the data themselves, or companies
that could afford to hire outside firms to perform the research for
them.  Our unique process to collect and organize transactional
information into actionable market intelligence has enabled us to make the same
high-value sales intelligence affordable to businesses of all
sizes.  We believe our business solutions provide our clients with a
distinct competitive advantage.





Our
information products and planning tools leverage its proprietary database, Onvia
Dominion®, which has been compiled over the last ten years, and includes
comprehensive, historical and real-time information on public and private
infrastructure activities unavailable elsewhere in the
marketplace.  Public sector information within the Onvia Dominion®
database is classified and linked within four key hubs of data: project history,
agency research, buyer research and competitive intelligence.  Our
database provides information on approximately 5 million procurement related
records connected to over 275,000 companies from across approximately 78,000
government agencies and purchasing offices nationwide.  Thousands of
records are added to our database each day.  Private sector data
includes over 160,000 current and
historical opportunities covering activity within the top 85 U.S. markets, and
comprehensive information on tens of thousands of companies, including
architects, developers, owners and land use attorneys.  The data
collected covers high demand land use planning details, including zoning
changes, development type, proposed use and key contacts for each
project.  We also provide contact information for over 24,000 planning
and zoning officials.  Information in our database has been collected,
formatted and classified by an in-house team of researchers and third-party
providers so that our clients are able to quickly find and analyze information
relevant to their businesses.





Most of
our revenues are currently generated from three sources: subscriptions, content
licenses, and management reports.  Subscription-based services are
typically prepaid, have a minimum term of one year and revenues are recognized
ratably over the term of the subscription.  Subscriptions are priced
based upon the geographic range, nature of content purchased and the number of
users.





Revenue
from content licenses is generated from clients who resell our business
intelligence content to their customers.  Content license contracts
are generally multi-year arrangements, and these
agreements typically have a higher annual contract value than our
subscription-based services.  Revenue from content license agreements
is recognized ratably over the term of the agreement.





Revenue
from the sale of management reports is recognized upon delivery of the report to
the client.  Pricing for management information reports is generally
based on one or a combination of the following: the number of records included
in the report; the geographic range of the report; or a flat fee based on the
type of report.  We also generate revenue from document download
services and list rental services, and these fees are recognized upon
delivery.





20





Management
Overview




Revenues
for 2008 were $21.1 million up 1% over 2007.  Fourth quarter revenue
was flat with 2007 but was up 7% over the third quarter of
2008.  Revenue growth accelerated in the latter half of 2008 due to
growth in Annual Contract Value, or ACV.  ACV represents the aggregate
annual contract value of our client base and is a leading indicator of future
revenues.  At December 31, 2008, ACV grew 13% to $19.8 million
compared to the prior year, and grew 4% over September 30, 2008.





Annual
net loss was $3.4 million for 2008, compared to net
income of $494,000 for 2007.  In 2008, we eliminated two senior
executive positions to reduce our cost structure in response to the weak
economy. Severance in the amount of $162,000 was recorded in 2008 related to
these two positions. We also invested in expanding our acquisition sales force
and new private sector content to support the Onvia Planning and Construction,
or OPC.  These
investments, while contributing to higher operating expenses, have fueled ACV
growth in 2008 and ultimately, are expected to result in revenue growth in
2009.  In
2007, net income included a $2.7 million one-time gain from the termination of a
lease for excess office space.





At
December 31, 2008 we had 8,400 clients, a decrease of 100 clients compared to
December 31, 2007, but an increase of 300 clients compared to September 30,
2008.  Client acquisition activities in the fourth quarter of 2008
benefited from the economic stimulus activity, the recently passed Economic
Stimulus Act of 2008, and the stalled commercial sector. Acquisition sales also
benefited from our larger, more experienced sales force.  In 2008 we
invested in sales and marketing in an effort to drive revenue and productivity
per sales person despite the economic headwinds.  Increased demand and
our larger, more experienced sales force accelerated new client acquisition in
the fourth quarter of 2008, which contributed to our accelerating ACV growth
rate.The other significant driver of ACV is annual contract value per client, or
ACVC, which grew to $2,360, up 14% compared to the fourth quarter of 2007, but
has remained flat for the last two quarters. In 2009, we plan to stimulate ACVC
growth by introducing new information products to the marketplace, and by
targeting high value prospects that resemble our best customers.





The weak
economy has changed our clients’ purchasing behavior across the board, which has
led to a downward trend in overall retention rates.  This negative
trend is led by small businesses in industries impacted by the soft real estate
market, such as construction companies, building product manufacturers, and
maintenance companies.  Budgets are tight and account expansions and
upgrades to value added products have slowed. In addition, more clients are
taking advantage of quarterly payment terms, which has impacted our cash flow
and unearned revenue.





In the
third quarter of 2008, we started a small business sales team which leverages a
new high-volume, lower touch sales process intended to reduce the costs to
acquire small customers, which typically
have lower contract values.  As a result we have improved the
profitability of our small customers in the last three months, but we have not
yet achieved our profitability objectives for this team.  We will
continue to evaluate the profitability and progress of this team over the near
term.





In 2008
we invested $5.0 million of
internal resources and capital expenditures to develop new products and
technologies.  During
the year we launched OPC, which helps architects, engineers and construction
companies focused on the commercial and residential construction markets to
identify opportunities for their goods and services at the very earliest stages
of development.  In addition, we are in the process of developing a
new content management system, or CMS, and a new
database platform, both of which are
intended to improve the relevance of our data, create more productive operating
processes, and enhance user experience. Our new CMS was developed to effectively
capture new types of valuable content, to improve the productivity of our
research organization, to improve data accuracy, and ultimately improve client
retention.





Our new
application and database platform is in beta, and we plan to launch it in the
first half of 2009.  The new platform will create a flexible and
scalable product development environment, improve our database search and
indexing capabilities, and enhance the user experience and usability of our
information services. The new search and indexing capabilities will dramatically
improve the relevance of our information to the specific needs of our clients.
The new user interface will have an entirely different look and feel, and will
integrate the commercial and government products into one robust database, which
will provide the opportunity to analyze a full set of data.  The new
platform is expected to serve as the basis for product development and growth in
the coming years.





Capital
investments are expected to slow once the new platform is launched in the first
half of 2009.  The investments made in 2008 are expected to result in
leading edge database architecture, which is intended
to create a significant competitive advantage for Onvia well into the
future.





21


Our
annual cost of revenue increased by 16% over last year to supply the content
required for OPC. Gross margin for the fourth quarter was down from 81% in the
fourth quarter of the prior year and improved to 80%, compared to 79% in the
third quarter of 2008.








Application
of Critical Accounting Policies and Management Estimates




Our
discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of commitments and contingencies. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
significantly from our estimates. In addition, any significant unanticipated
changes in any of our assumptions could have a material adverse effect on our
business, financial condition, and results of operations. We believe the
following are our most significant accounting policies and
estimates:




Revenue
Recognition




Our
revenues are primarily generated from subscriptions, content licenses and
management reports.  Our subscriptions are generally annual contracts;
however, we also offer, on a limited basis, extended multi-year contracts to our
subscription clients, and content licenses are generally multi-year
agreements.  Subscription
and content licenses are recognized ratably over the term of the agreement. We
also generate revenue from fees charged for management reports, document
download services, and list rental services, and revenue from these types of
services is recognized upon delivery.





Our
subscription services and management information reports are also sold together
as a bundled offering.  Pursuant to the provisions of EITF Issue No.
00-21, Revenue Arrangements
with Multiple Deliverables, we allocate revenue from these bundled sales
ratably between the subscription services and the management reports based on
their relative fair values, which are consistent with established list prices
for those offerings.





Unearned
revenue consists of payments received for prepaid subscriptions from our
non-enterprise clients whose terms extend into periods beyond the balance sheet
date, as well as the invoiced portion of enterprise contracts and content
licenses whose terms extend into periods beyond the balance sheet
date.





Internal
Use Software





We
account for the costs to develop or obtain software for internal use in
accordance with the American Institute of Certified Public Accountants, or
AICPA, Statement of Position No. 98-1, or SOP 98-1, Accounting for Costs of Computer
Software Developed for or Obtained for Internal Use. As a result, we
capitalize qualifying computer software costs incurred during the “application
development stage.” Amortization of these costs begins once the product is ready
for its intended use.  These capitalized software costs are amortized
on a straight-line basis over the estimated useful life of the product,
typically 3 to 5 years. The amount of costs capitalized within any period is
dependent on the nature of software development activities and projects in each
period.





During
2008 and 2007, we abandoned
$97,000 and $45,000, respectively,
related to internal use software.  The abandoned assets relate to
internal use code that was initially developed to enhance the functionality of
existing products and internal workflow.  We no longer believe that
the code will be compatible with the new technology platform currently being
developed and we believe these costs have no future value.  The
$97,000 and $45,000 in abandonments represents the full unamortized value of
these assets and is included in operating expenses under the general and
administrative category in the years ended December 31, 2008 and 2007,
respectively.




Non-cash
Stock-Based Compensation




We
account for stock-based compensation according to the provisions of Statement of
Financial Accounting Standards, or SFAS, No. 123R, Share-Based Payment, or FAS
123R, which requires measurement of compensation cost for all stock-based awards
at fair value on the date of grant and recognition of stock-based compensation
cost over the requisite service period for awards expected to vest. The fair
value of our stock options is determined using the Black-Scholes valuation
model.  Such value is recognized as expense over the service period,
net of estimated forfeitures. The estimation of stock awards that will
ultimately vest requires judgment, and to the extent actual results or updated
estimates differ from our current estimates, such amounts will be recorded as a
cumulative adjustment in the period estimates are revised. We consider many
factors when estimating expected forfeitures, including employee class and
historical experience. There is also significant judgment required in the
estimation of the valuation assumptions used to determine the fair value of
options granted.  Please refer to the discussion of valuation
assumptions in Note 2 of the “Notes to Consolidated Financial Statements” of
this Report for additional information on the estimation of these
variables.  Actual results, and future changes in estimates, may
differ substantially from our current estimates.





22


Accounts
Receivable and Allowance for Doubtful Accounts




We record
accounts receivable for the invoiced or earned but not invoiced portion of our
enterprise contracts and content licenses once we have a signed agreement and
amounts are billable pursuant to the contract terms. We do not record a
receivable for the unbilled and unearned portion of our enterprise contracts or
content licenses. As of December 31, 2008 and 2007, the unbilled portion of
enterprise contracts and content licenses was approximately $2.6 million and
$1.6 million, respectively; unbilled enterprise contracts and content licenses
increased as a result of increased acquisition sales and clients adopting
quarterly billing terms. Accounts receivable are recorded at their net
realizable value, after deducting an allowance for doubtful accounts. Such
allowances are determined based on a review of an aging of accounts and reflect
either specific accounts or estimates based on historical incurred
losses.




Contractual
Obligations




Future
required payments under contracts, excluding operating expenses for our lease
obligations, as of December 31, 2008 are as follows for the periods
specified:


Payments
      due by periodTotal
                        
                        
                        Less
      than 1 year
                        
                        
                        1
      - 3 years
                        
                        
                        3
      - 5 years
                        
                        
                        More
      than 5 yearsReal
      estate operating lease obligations
                        
                        $
                        6,709,676
                        
                        
                        $
                        899,063
                        
                        
                        $
                        2,862,279
                        
                        
                        $
                        2,054,163
                        
                        
                        $
                        894,171Purchase
      obligations (1)
                        
                        
                        1,782,805
                        
                        
                        
                        1,353,953
                        
                        
                        
                        428,852
                        
                        
                        
                        -
                        
                        
                        
                        -Capital
      lease obligations (2)
                        
                        
                        94,730
                        
                        
                        
                        88,359
                        
                        
                        
                        6,371
                        
                        
                        
                        -
                        
                        
                        
                        -Other
      operating lease obligations (3)
                        
                        
                        18,670
                        
                        
                        
                        18,670
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        $
                        8,605,881
                        
                        
                        $
                        2,360,045
                        
                        
                        $
                        3,297,502
                        
                        
                        $
                        2,054,163
                        
                        
                        $
                        894,171





(1)
            Purchase
      obligations relate to software development agreements, co-location hosting
      arrangements, telecom agreements, marketing agreements and third-party
      content agreements.


(2)
            Capital
      lease obligations relate to server equipment and related maintenance
      agreements.


(3)
            Other
      operating lease obligations relate to office equipment
    leases.








23


Consolidated
Results of Operations





The
following table provides our selected consolidated results of operations for the
indicated periods (in thousands of dollars and as a percentage of total
revenue):





Years
      Ended December 31,2008
                                                
                                                2007
                                                
                                                2006Revenue:Subscription
                                                
                                                $
                                                18,090
                                                
                                                
                                                
                                                85.6
                                                %
                                                
                                                $
                                                17,802
                                                
                                                
                                                
                                                85.1
                                                %
                                                
                                                $
                                                14,412
                                                
                                                
                                                
                                                86.1
                                                %Content
      license
                                                
                                                
                                                2,239
                                                
                                                
                                                
                                                10.6
                                                %
                                                
                                                
                                                2,442
                                                
                                                
                                                
                                                11.7
                                                %
                                                
                                                
                                                2,111
                                                
                                                
                                                
                                                12.6
                                                %Management
      information reports
                                                
                                                
                                                568
                                                
                                                
                                                
                                                2.7
                                                %
                                                
                                                
                                                454
                                                
                                                
                                                
                                                2.2
                                                %
                                                
                                                
                                                -
                                                
                                                
                                                
                                                0.0
                                                %Other
                                                
                                                
                                                245
                                                
                                                
                                                
                                                1.1
                                                %
                                                
                                                
                                                230
                                                
                                                
                                                
                                                1.0
                                                %
                                                
                                                
                                                216
                                                
                                                
                                                
                                                1.3
                                                %Total
      revenue
                                                
                                                
                                                21,142
                                                
                                                
                                                
                                                100.0
                                                %
                                                
                                                
                                                20,928
                                                
                                                
                                                
                                                100.0
                                                %
                                                
                                                
                                                16,739
                                                
                                                
                                                
                                                100.0
                                                %Cost
      of revenue
                                                
                                                
                                                4,326
                                                
                                                
                                                
                                                20.5
                                                %
                                                
                                                
                                                3,731
                                                
                                                
                                                
                                                17.8
                                                %
                                                
                                                
                                                3,395
                                                
                                                
                                                
                                                20.3
                                                %Gross
      margin
                                                
                                                
                                                16,816
                                                
                                                
                                                
                                                79.5
                                                %
                                                
                                                
                                                17,197
                                                
                                                
                                                
                                                82.2
                                                %
                                                
                                                
                                                13,344
                                                
                                                
                                                
                                                79.7
                                                %Sales
      and marketing expenses
                                                
                                                
                                                12,300
                                                
                                                
                                                
                                                58.2
                                                %
                                                
                                                
                                                11,729
                                                
                                                
                                                
                                                56.0
                                                %
                                                
                                                
                                                11,712
                                                
                                                
                                                
                                                70.0
                                                %Technology
      and development expenses
                                                
                                                
                                                3,818
                                                
                                                
                                                
                                                18.1
                                                %
                                                
                                                
                                                4,411
                                                
                                                
                                                
                                                21.1
                                                %
                                                
                                                
                                                4,215
                                                
                                                
                                                
                                                25.2
                                                %General
      and administrative expenses
                                                
                                                
                                                4,505
                                                
                                                
                                                
                                                21.3
                                                %
                                                
                                                
                                                4,198
                                                
                                                
                                                
                                                20.1
                                                %
                                                
                                                
                                                3,980
                                                
                                                
                                                
                                                23.7
                                                %Idle
      lease accrual
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (2,653
                                                )
                                                
                                                
                                                (12.7
                                                %)
                                                
                                                
                                                (67
                                                )
                                                
                                                
                                                (0.4
                                                %)Total
      operating expenses
                                                
                                                
                                                20,623
                                                
                                                
                                                
                                                97.6
                                                %
                                                
                                                
                                                17,685
                                                
                                                
                                                
                                                84.5
                                                %
                                                
                                                
                                                19,840
                                                
                                                
                                                
                                                118.5
                                                %Loss
      from operations
                                                
                                                
                                                (3,807
                                                )
                                                
                                                
                                                (18.0
                                                %)
                                                
                                                
                                                (488
                                                )
                                                
                                                
                                                (2.3
                                                %)
                                                
                                                
                                                (6,496
                                                )
                                                
                                                
                                                (38.8
                                                %)Interest
      and other income, net
                                                
                                                
                                                433
                                                
                                                
                                                
                                                2.0
                                                %
                                                
                                                
                                                982
                                                
                                                
                                                
                                                4.7
                                                %
                                                
                                                
                                                952
                                                
                                                
                                                
                                                5.7
                                                %Net
      income / (loss)
                                                
                                                $
                                                (3,374
                                                )
                                                
                                                
                                                (16.0
                                                %)
                                                
                                                $
                                                494
                                                
                                                
                                                
                                                2.4
                                                %
                                                
                                                $
                                                (5,544
                                                )
                                                
                                                
                                                (33.1
                                                %)
  Comparison
of Years Ended December 31, 2008, 2007 and
2006




Revenue


Revenue
increased 1% to $21.1 million for the year ended December 31, 2008, compared to
$20.9 million for the year ended December 31, 2007. Our growth rates began to
slow in the fourth quarter of 2007 due to our smaller acquisition sales force
and lack of significant new products since 2005.  In the first half of
2008, our growth rate was further impacted by changes we made in our sales
teams’ focus.  With the launch of OPC, we directed our sales force to
prioritize building a pipeline for OPC, to concentrate on cross-sell and up-sell
activities and to deemphasize advance renewals.  We also accelerated
the transfer of our first year clients to new account managers. The combination
of these decisions had a short-term negative impact on new client acquisition
and client retention during first half of 2008. To mitigate this short-term
slowing of revenue, we invested in expanding our acquisition sales force and in
marketing programs to drive revenue and revenue per salesperson.  In
the second half of 2008, the economic stimulus activity, the recently passed
recovery legislation, and the stalled commercial sector increased interest in
public sector opportunities and revenue growth accelerated in the latter half of
2008.





Revenue
increased 25% to $20.9 million for the year ended December 31, 2007, compared to
$16.7 million for the year ended December 31, 2006. The increase was primarily
driven by an increase in ACVC and revenue generated from our management
information report products which were introduced in 2007.  The
increase in ACVC was attributable to increased adoption of our Onvia Business
Builder product, upgrading clients into higher valued products and scheduled
price increases.




Cost
of Revenue


Cost of
revenue increased 16% to $4.3 million for the year ended December 31, 2008,
compared to $3.7 million for the year ended December 31, 2007.  Our
cost of revenue consists primarily of employee costs associated with collecting,
categorizing and publishing our content, and also includes third-party content
fees and credit card processing fees. The increase in cost of revenue was
primarily due to an increase of $593,000 in third-party content costs related to
increased content requirements for our OPC product launched in February
2008. Total
third-party content and credit card processing fees were approximately $1.7
million and $1.1 million for the years ended December 31, 2008 and 2007,
respectively. Weighted average headcount on our content team was 56 during 2008,
compared to 58 during 2007.





For the
year ended December 31, 2007, cost of revenue increased 10% to $3.7 million
compared to $3.4 million for the year ended December 31, 2006. Cost of revenue
increased due primarily to increases in payroll and contract labor related
expenses, third party content costs, and recruiting fees.





24


Sales
and Marketing


Sales and
marketing expenses were $12.3 million and $11.7 million for the years ended
December 31, 2008 and 2007, respectively, representing an aggregate increase of
$572,000, or 5%. Employee costs increased by $1.2 million due to an increase in
weighted average headcount to 89 during 2008, compared to 79 during
2007.  This was offset by the decrease of $112,000 of stock-based
compensation expense as the estimated forfeiture rate used to calculate non-cash
stock-based compensation expense in 2008 was increased to reflect forfeitures
related to terminated employees. Additionally, recruiting expenses decreased
$136,000 primarily because we placed our Vice President of Sales and other sales
leadership positions in 2007. Allocated expenses, which consist of depreciation
and amortization and other facilities related expenses were $422,000 higher in
2007 because allocated expenses included accelerated depreciation of leasehold
improvements due to our lease termination.  Allocated expenses are
allocated based on headcount in the respective departments.





Sales and
marketing expenses were $11.7 million for both the years ended December 31, 2007
and 2006. While sales and marketing expenses were relatively flat over the
comparable periods, we did see changes in the following categories: Employee
costs decreased by $353,000 due to lower weighted average headcount of 79 in
2007, compared to 91 in 2006. Non-cash stock-based compensation decreased
$166,000, primarily because of an increase in our estimated forfeiture rate used
to calculate non-cash stock-based compensation expense in 2007. Marketing and
telecom expenses decreased $135,000 and $68,000, respectively. These decreases
were offset by increases of $685,000 in allocated expenses and $90,000 in
recruiting fees.  2007 allocated expenses were higher primarily due to
the acceleration of depreciation on previous leasehold improvements as mentioned
above.





Technology
and Development


Technology
and development expenses were $3.8 million and $4.4 million for the years ended
December 31, 2008 and 2007, respectively, representing a decrease of $593,000,
or 13%. The decrease is primarily attributable to decreases of $491,000 in
allocated costs and $196,000 in recruiting fees. Allocated expenses decreased
due to lower facilities related expenses and depreciation. Recruiting fees
decreased because most of the open technology positions were filled without
using outside recruiters. These decreases were offset by increases of $285,000
in employee costs, $244,000 in amortization of maintenance and license
agreements and $181,000 in co-location expenses. Weighted average headcount in
this group decreased to 26 in 2008 compared to 29 in 2007, but employee costs
increased mostly due to a combined $234,000 increase in bonus incentive related
to new product development milestones and accrued vacation
expenses.  Amortization of license and maintenance agreements
increased due to increases in prepaid software agreements associated with
maintaining our systems and developing the new technology platform. Co-location
expenses increased because we now host our web, database and
transaction-processing servers to a co-location facility in 2008.  In
addition, $595,000 more of internal use software development costs were
capitalized in 2008 because of the development of a new technology platform
initiative scheduled for release in the middle of 2009.





Technology
and development expenses were $4.4 million and $4.2 million for the years ended
December 31, 2007 and 2006, respectively, representing an increase of $196,000,
or 5%. The increase in total was primarily attributable to increases of $450,000
in allocated expenses because of an overall increase in depreciation and
amortization, $160,000 in recruiting fees due to using outside recruiters to
fill open technology positions and $80,000 in payroll related expenses due to
severance payments to our former Chief Information Officer, and $28,000 in
travel expenses.  These costs were partially offset by an increase of
$551,000 in capitalization of internal use software development
costs.





General
and Administrative


General
and administrative expenses were $4.5 million and $4.2 million for the years
ended December 31, 2008 and 2007, respectively, representing an increase of
$307,000, or 7%. During 2008, due to an assessment for past due sales taxes in
the state of Texas, business taxes increased by $191,000. Please refer to the
discussion on Texas sales tax in Note 6 of the “Notes to the Consolidated
Financial Statements” of this Report for additional information. Recruiting fees
increased $101,000 primarily due to the hire of our new Vice President of
Marketing. Employee costs increased $91,000 primarily due to accrued severance
for our former Vice President of Human Resources. Relocation fees of $63,000
were incurred for the move to our new leased space as discussed in more detail
under “Lease Obligations”. Bad debt expense and impairment of long lived assets
increased $56,000 and $51,000, respectively. Bad debt expense increased due to
an increase in the number of subscriptions being sold with payment terms. The
expense recorded for abandoned assets is discussed in more detail in Internal
Use Software under “Application of Critical Accounting Policies and Management
Estimates” above.  These increases were partially offset by decreases
in stock compensation of $101,000 as a result of revising our estimated
forfeiture rate, and professional fees of $131,000 as we no longer had
consulting fees associated with our office relocation.





25


General
and administrative expenses were $4.2 million, or 20.1% of revenue, and $4.0
million, or 23.7% of revenue, for the years ended December 31, 2007 and 2006,
respectively, representing an increase of $218,000, or 5%.  We saw
increases in the following expense categories for the general and administrative
group during 2007:  $118,000 in payroll related expenses, $115,000 in
business taxes, $61,000 in recruiting fees, and a write-off of $45,000 in
abandoned internal use software.  Payroll expenses increased because
of normal performance based increases and severance payments to our former
General Counsel.  Weighted average headcount in this group was 11 in
both 2007 and 2006.  Business taxes increased as a result of increased
revenue, and recruiting fees increased because the competitive employment market
in Seattle required greater use of outside recruiters to fill open positions in
2007. These increases were partially offset by decreases of $175,000 in non-cash
stock-based compensation, and $43,000 in professional fees.




Idle
Lease Charges


Onvia
recorded a reduction in expenses of $2.7 million and  $67,000 for the
years ended December 31, 2007 and 2006, respectively, related to our idle lease
accrual.  The decrease in 2007 was to eliminate the remaining balance
in our idle lease accrual as a result of the termination of our lease on our
former corporate headquarters building. The adjustment in 2006 was made to
adjust our estimated accrual to the actual remaining obligation on the lease
pursuant to the terms of a lease amendment in September 2006.




The following
table displays rollforwards of the idle lease accrual which was reduced to $0 at
December 31, 2007:





AmountsAccruals
      at
                                              
                                              
                                              
                                              
                                              
                                              Paid,
      Net
                                              
                                              
                                              Accruals
      atDecember
      31,
                                              
                                              
                                              2006
                                              
                                              
                                              of
      Sublease
                                              
                                              
                                              December
      31,2005
                                              
                                              
                                              Reduction
                                              
                                              
                                              Income
                                              
                                              
                                              2006Idle
      lease charges
                                              
                                              $
                                              6,537,735
                                              
                                              
                                              $
                                              (66,691)
                                              
                                              
                                              $
                                              (2,691,829)
                                              
                                              
                                              $
                                              3,779,215AmountsAccruals
      at
                                              
                                              
                                              
                                              
                                              
                                              
                                              Paid,
      Net
                                              
                                              
                                              Accruals
      atDecember
      31,
                                              
                                              
                                              2007
                                              
                                              
                                              of
      Sublease
                                              
                                              
                                              December
      31,2006
                                              
                                              
                                              Reduction
                                              
                                              
                                              Income
                                              
                                              
                                              2007Idle
      lease charges
                                              
                                              $
                                              3,779,215
                                              
                                              
                                              $
                                              (2,652,550)
                                              
                                              
                                              $
                                              (1,126,665)
                                              
                                              
                                              $
                                              -




Other
Income, Net


Other
income, net consists of interest earned on our investment accounts, letter of
credit fees associated with our security deposits, interest expense and other
miscellaneous income or expense.  Other income, net was $433,000,
$982,000 and $952,000 for the years ended December 31, 2008, 2007 and 2006,
respectively.  The decrease in 2008 is primarily attributable to a
decrease in short term interest rates as compared to previous
years.  Interest expense was $20,000, $16,000 and $0 for the years
ended December 31, 2008, 2007 and 2006, respectively.  Interest
expense in 2008 and 2007 relates to capital leases for server
equipment.




Provision
for Income Taxes


We have
incurred net operating losses, or NOL, from our inception through December 31,
2008, with the exception of the third quarter of 2007.  Because of
this history of net operating losses, although we recorded net operating income
for the fiscal year ended December 31, 2007, we do not currently believe that
the future realization of the tax benefit associated with these net loss
carryforwards is more likely than not; therefore, we have recorded a valuation
allowance for the full amount of our net deferred tax assets.  We will
continue to evaluate the likelihood that these tax benefits may be realized, and
may reverse all or a portion of our valuation allowance in the future if it is
determined that realization of these benefits is more likely than
not.





Utilization
of the NOL carryforwards may be subject to a substantial annual limitation due
to ownership change limitations that may have occurred previously or that could
occur in the future provided by Section 382 of the Internal Revenue Code of
1986, as amended (the “Code”). These ownership changes may limit the amount of
NOL carryforwards that can be utilized annually to offset future taxable income
and tax, respectively. In general, an ownership change, as defined by Section
382 of the Code, results from transactions increasing the ownership of certain
stockholders or public groups in the stock of a corporation by more than 50
percentage points over a three-year period.





In the
future, the Company plans to complete a Section 382 analysis regarding ownership
changes that may have occurred, but at this time the Company cannot reasonably
estimate whether such a change has occurred.  Any carryforwards that
will expire prior to utilization as a result of such limitations will be removed
from deferred tax assets with a corresponding reduction of the valuation
allowance.





26


We
currently have a full valuation allowance for our deferred tax assets as the
future realization or the tax benefit is not more likely than not.




Net
Income and Loss





For the
year ended December 31, 2008 we reported a net loss of $3.4 million, compared to
net income of $494,000 and net loss of $5.5 million in 2007 and 2006,
respectively.  In 2008, we invested in expanding our acquisition sales
force and in new private sector content to support the new OPC product. Net
income for the year ended December 31, 2007 includes the reversal of $2.7
million of our idle lease accrual. The change from a net income position to a
net loss position is primarily related to slower revenue growth and increased
operating expenses as discussed above in conjunction with the impact of the
lease transactions.








Liquidity
and Capital Resources


Our
principal sources of liquidity are cash, cash equivalents and short-term
investments.  Our combined cash, cash equivalents and short-term
investments were $13.0 million at December 31, 2008, and our working capital was
$4.3 million. From December 31, 2007 to December 31, 2008, our cash, cash
equivalents and short-term investments decreased $1.3 million, mostly due to
increased vendor payments of $1.4 million related to office relocation, software
licenses and third party content providers. There were also additions to
property and equipment of $1.6 million and to internally developed software of
$3.4 million. This is offset by the receipt of $2.5 million in reimbursable
tenant improvement costs and  the return of our $3.5 million security
deposit for the lease on our former corporate headquarters. The remaining
decrease is from a $489,000 collective increase in accounts receivable and
prepaid expenses.





We did
not generate positive cash flow from operations in 2008, primarily because of
increased vendor payments as discussed above, lower cash receipts as planned
from a reduced focus on advance renewals and a higher adoption of quarterly
payment terms by our clients.  We will seek to generate positive cash
flows from operations in the future via our efforts to increase client
acquisition, retention and increasing our ACV. Until such time as we begin
generating recurring positive cash flows from operations, we will utilize our
current cash and cash equivalents and current revenues to fund
operations.  We expect to increase revenue from current operations by
increasing our ACV through a combination of expansion of our product offering
and scheduled price increases.





If the
continuing slowdown in the economy triggers an increase in the number of
subscriptions sold with delayed payment terms, such as quarterly payment terms,
our operating cash flow may be adversely impacted in the near term; however, we
believe that our current cash and cash equivalents are sufficient to fund
current operations for the near – term foreseeable future.





If we
engage in merger or acquisition transactions or our overall operating plans
change, we may require additional equity or debt financing to meet future
working capital needs, which may have a dilutive effect on existing stockholders
or may include securities that have rights, preferences or privileges senior to
those of the rights of our common stock. We cannot make assurances that if
additional financing is required, it will be available, or that such financing
can be obtained on satisfactory terms.




Operating
Activities




Net cash
used in operating activities was $2.3 million for the year ended December 31,
2008, compared to net cash provided by operating activities of $2.1 million and
net cash used in operating activities of $3.6 million for the years ended
December 31, 2007 and 2006, respectively.  The change from net cash
provided by operating activities to net cash used in operating activities is
primarily attributable to a decrease in cash collected for prepaid subscriptions
because of a planned reduction in advance renewals in 2008, an increase in the
number of clients receiving quarterly payment terms and an increase in vendor
payments associated with our office relocation in the first quarter of
2008.





The
increase in cash provided by operating activities in 2007 compared to 2006 was
primarily attributable to an increase in sales in 2007 compared to 2006 and a
decrease in payments on our idle leased office space.




Investing
Activities




Net cash
provided by investing activities was $1.0 million for the year ended December
31, 2008, compared to $2.6 million for the year ended 2007, and net cash used in
investing activities of $269,000 for the year ended December 31,
2006.




27


Net cash
provided by investing activities in 2008 is primarily attributable to the return
of our $3.5 million security deposit on the lease for our former corporate
headquarters as a result of the termination of that lease and reimbursement of
$2.5 million in reimbursable tenant improvements.  These increases
were partially offset by additions to property and equipment of $1.6 million and
internal use software of $3.4 million.  The property and equipment
purchases were primarily comprised of $701,000 in computer hardware purchases
required for the development of new applications and database platform, and
$704,000 in leasehold improvements for our new office building. We do not expect
to incur significant new costs associated with leasehold improvements in future
quarters.





The
change in net cash provided by investing activities in 2007 from net cash used
in investing activities in 2006 is primarily due to an increase in sales of
investments in 2007 compared to 2006.  This increase was partially
offset by cash outflows of $2.7 million in reimbursable tenant improvements and
$538,000 for a security deposit on our new office lease.  We also saw
a decrease in the purchase of property and equipment in 2007 compared to
2006.





Financing
Activities




Net cash
provided by financing activities was $13,000, $1.2 million and $260,000 for the
years ended December 31, 2008, 2007 and 2006, respectively. Net cash provided by
financing activities in 2008, 2007 and 2006 was principally related to the
exercise of stock options and purchases of stock under our employee stock
purchase plan and was offset during 2008 and 2007 by principal payments on
capital leases.  A decrease in our stock price during 2008 resulted in
a decrease in the number of option exercises compared to prior
years.







New
accounting pronouncements





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
No. 141(R)”). In SFAS No. 141(R), the FASB retained the fundamental requirements
of SFAS No. 141 to account for all business combinations using the acquisition
method and for an acquiring entity to be identified in all business
combinations. However, the revised standard requires the acquiring entity in a
business combination to recognize all the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to immediately expense costs related to the acquisition.
SFAS No. 141(R) is effective for annual periods beginning on or after December
15, 2008. The impact that SFAS No. 141(R) will have on our consolidated
financial statements when effective will depend upon the nature, terms and size
of the acquisitions completed after the effective date.





On
January 1, 2008, we adopted the provisions of SFAS No. 157 which defines fair
value, establishes a framework for measuring fair value and expands disclosure
of fair value measurements. SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and accordingly,
does not require any new fair value measurements. On February 12, 2008, the FASB
issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No.
157 , which delayed the effective date of SFAS No. 157 for nonfinancial
assets and nonfinancial liabilities to fiscal years beginning after November 15,
2008. The adoption of SFAS No. 157 for financial assets and liabilities did not
have a material impact on our financial position, cash flows, or results of
operations. We are currently evaluating the remaining provisions of SFAS No. 157
to determine what effect its adoption on January 1, 2009 for nonfinancial assets
and nonfinancial liabilities will have on our financial position, cash flows,
and results of operations.





In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities.
This FSP is effective for fiscal years beginning after December 15, 2008. This
FSP classifies unvested share-based payment grants containing non-forfeitable
rights to dividends as participating securities that will be included in the
computation of earnings per share. As of December 31, 2008, we had no unvested
share-based payment grants with non-forfeitable dividend rights. We adopted FSP
EITF 03-6-1 on January 1, 2009, but do not expect the adoption of this FSP to
have a material impact on our financial position, cash flows or results of
operations.








ITEM 7A.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




We are
exposed to financial market risks, including changes in interest rates and
equity prices; however, we consider our exposure to these risks to be
insignificant.




28


Interest
Rate Risk




We have
assessed our susceptibility to certain market risks, including interest rate
risk associated with financial instruments. We manage our interest rate risk by
purchasing investment-grade securities and diversifying our investment portfolio
among issuers and maturities.  Due to the fact that we carry only
$89,000 in debt related to capital leases as of December 31, 2008, and due to
our investment policies and the short-term nature of our investments, we believe
that our risk associated with interest rate fluctuations is
negligible.





Historically,
our investment portfolio consisted of any or all of the following (U.S.
denominated only): money market funds, commercial paper, municipal securities,
and corporate debt securities with remaining maturities of thirteen months or
less; however, as of December 31, 2008, our investments consisted entirely of
money market funds.  Our primary investment objectives are
preservation of principal, a high degree of liquidity and a maximum total return
consistent with our investment objectives. Investments in U.S. government and
agency securities (and money market funds investing in them) are exempt from
size limitations; all other securities are limited to 10% of the portfolio at
the time of purchase, per issuer. In addition, the cumulative investments in an
individual corporation, financial institution or financial institution’s
security are limited to $10 million. We consider the reported amounts of these
investments to be reasonable approximations of their fair values.




Foreign
Currency Risk




Our
foreign currency risk exposure is insignificant, because all of our sales are
currently denominated in U.S. currency.




Equity
Price Risk




We do not
own any equity instruments and we do not currently have plans to raise
additional capital in the equity markets; therefore, our equity price risk is
insignificant.





29


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      The Board of Directors and Stockholders
of


Onvia,
      Inc.


Seattle,
      Washington






We have
audited the accompanying consolidated balance sheets of Onvia, Inc and
subsidiary (the "Company") as of December 31, 2008 and 2007, and the related
consolidated statements of operations and other comprehensive (loss) / income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2008.  Our audits also included the financial
statement schedule listed in the Index at Item 15.  These financial
statements and the financial statement schedule are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
the financial statements and the financial statement schedule based on our
audits.






We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.






In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2008 and
2007, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2008, in conformity with accounting
principles generally accepted in the United States of America.  Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole presents fairly
in all material respects the information set forth therein.










/s/    DELOITTE
& TOUCHE LLP








Seattle,
Washington


March 31,
2009





30


ITEM 8.
            CONSOLIDATED
      FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA




ONVIA,
INC.




CONSOLIDATED
BALANCE SHEETS


DECEMBER
31, 2008 AND 2007




December
      31, 2008
                                                
                                                
                                                December
      31, 2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                                
                                                $
                                                13,042,556
                                                
                                                
                                                $
                                                14,301,149Accounts
      receivable, net of allowance for doubtful accounts of $31,960 and
      $52,143
                                                
                                                
                                                1,644,904
                                                
                                                
                                                
                                                1,392,784Prepaid
      expenses and other current assets
                                                
                                                
                                                785,917
                                                
                                                
                                                
                                                549,266Reimbursable
      tenant improvements
                                                
                                                
                                                147,260
                                                
                                                
                                                
                                                2,663,060Security
      deposits, current portion
                                                
                                                
                                                134,517
                                                
                                                
                                                
                                                3,500,000Total
      current assets
                                                
                                                
                                                15,755,154
                                                
                                                
                                                
                                                22,406,259LONG
      TERM ASSETS:Property
      and equipment, net of accumulated depreciation of $2,781,945 and
      $6,209,017
                                                
                                                
                                                1,710,146
                                                
                                                
                                                
                                                957,189Security
      deposits, net of current portion
                                                
                                                
                                                403,552
                                                
                                                
                                                
                                                538,070Internal
      use software, net of accumulated amortization of $1,752,029 and
      $1,078,850
                                                
                                                
                                                4,446,984
                                                
                                                
                                                
                                                1,838,208Other
      assets
                                                
                                                
                                                6,688
                                                
                                                
                                                
                                                1,697Total
      long term assets
                                                
                                                
                                                6,567,370
                                                
                                                
                                                
                                                3,335,164TOTAL
      ASSETS
                                                
                                                $
                                                22,322,524
                                                
                                                
                                                $
                                                25,741,423LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                                
                                                $
                                                852,701
                                                
                                                
                                                $
                                                2,220,596Accrued
      expenses
                                                
                                                
                                                1,490,666
                                                
                                                
                                                
                                                1,334,750Idle
      lease accrual, current portion
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Obligations
      under capital leases, current portion
                                                
                                                
                                                82,472
                                                
                                                
                                                
                                                112,821Unearned
      revenue, current portion
                                                
                                                
                                                8,979,103
                                                
                                                
                                                
                                                9,096,511Deferred
      rent, current portion
                                                
                                                
                                                60,538
                                                
                                                
                                                
                                                2,627Total
      current liabilities
                                                
                                                
                                                11,465,480
                                                
                                                
                                                
                                                12,767,305LONG
      TERM LIABILITIES:Idle
      lease accrual, net of current portionObligations
      under capital leases, net of current portion
                                                
                                                
                                                6,174
                                                
                                                
                                                
                                                88,646Unearned
      revenue, net of current portion
                                                
                                                
                                                138,578
                                                
                                                
                                                
                                                341,817Deferred
      rent, net of current portion
                                                
                                                
                                                919,213
                                                
                                                
                                                
                                                279,469Total
      long term liabilities
                                                
                                                
                                                1,063,965
                                                
                                                
                                                
                                                709,932TOTAL
      LIABILITIES
                                                
                                                
                                                12,529,445
                                                
                                                
                                                
                                                13,477,237COMMITMENTS
      AND CONTINGENCIES (Note 10)STOCKHOLDERS’
      EQUITY:Preferred
      stock; $.0001 par value: 2,000,000 shares authorized; no shares issued or
      outstanding
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Common
      stock; $.0001 par value: 11,000,000 shares authorized; 8,254,909 and
      8,224,383 shares issued; and 8,246,828 and 8,207,465 shares
      outstanding
                                                
                                                
                                                825
                                                
                                                
                                                
                                                821Treasury
      stock, at cost: 8,081 and 16,918 shares
                                                
                                                
                                                (39,677
                                                )
                                                
                                                
                                                (83,067
                                                )Additional
      paid in capital
                                                
                                                
                                                352,127,344
                                                
                                                
                                                
                                                351,268,030Accumulated
      deficit
                                                
                                                
                                                (342,295,413
                                                )
                                                
                                                
                                                (338,921,598
                                                )Total
      stockholders’ equity
                                                
                                                
                                                9,793,079
                                                
                                                
                                                
                                                12,264,186TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                
                                                $
                                                22,322,524
                                                
                                                
                                                $
                                                25,741,423


See notes to consolidated financial
statements.


31


ONVIA,
INC.




CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) / INCOME


YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006




2008
                                                                
                                                                
                                                                2007
                                                                
                                                                
                                                                2006RevenueSubscription
                                                                
                                                                $
                                                                18,089,617
                                                                
                                                                
                                                                $
                                                                17,801,522
                                                                
                                                                
                                                                $
                                                                14,411,914Content
      license
                                                                
                                                                
                                                                2,239,075
                                                                
                                                                
                                                                
                                                                2,441,753
                                                                
                                                                
                                                                
                                                                2,110,634Management
      reports
                                                                
                                                                
                                                                568,491
                                                                
                                                                
                                                                
                                                                453,993
                                                                
                                                                
                                                                
                                                                -Other
                                                                
                                                                
                                                                244,831
                                                                
                                                                
                                                                
                                                                230,660
                                                                
                                                                
                                                                
                                                                215,972Total
      revenue
                                                                
                                                                
                                                                21,142,014
                                                                
                                                                
                                                                
                                                                20,927,928
                                                                
                                                                
                                                                
                                                                16,738,520Cost
      of revenue
                                                                
                                                                
                                                                4,326,139
                                                                
                                                                
                                                                
                                                                3,731,224
                                                                
                                                                
                                                                
                                                                3,394,612Gross
      margin
                                                                
                                                                
                                                                16,815,875
                                                                
                                                                
                                                                
                                                                17,196,704
                                                                
                                                                
                                                                
                                                                13,343,908Operating
      expenses:Sales
      and marketing
                                                                
                                                                
                                                                12,299,976
                                                                
                                                                
                                                                
                                                                11,728,127
                                                                
                                                                
                                                                
                                                                11,712,294Technology
      and development
                                                                
                                                                
                                                                3,817,885
                                                                
                                                                
                                                                
                                                                4,411,205
                                                                
                                                                
                                                                
                                                                4,215,098General
      and administrative
                                                                
                                                                
                                                                4,504,982
                                                                
                                                                
                                                                
                                                                4,197,837
                                                                
                                                                
                                                                
                                                                3,979,526Idle
      lease expense
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (2,652,550
                                                                )
                                                                
                                                                
                                                                (66,691
                                                                )Total
      operating expenses
                                                                
                                                                
                                                                20,622,843
                                                                
                                                                
                                                                
                                                                17,684,619
                                                                
                                                                
                                                                
                                                                19,840,227Loss
      from operations
                                                                
                                                                
                                                                (3,806,968
                                                                )
                                                                
                                                                
                                                                (487,915
                                                                )
                                                                
                                                                
                                                                (6,496,319
                                                                )Other
      income, net
                                                                
                                                                
                                                                433,153
                                                                
                                                                
                                                                
                                                                982,281
                                                                
                                                                
                                                                
                                                                952,475Net
      (loss) / income
                                                                
                                                                $
                                                                (3,373,815
                                                                )
                                                                
                                                                $
                                                                494,366
                                                                
                                                                
                                                                $
                                                                (5,543,844
                                                                )Unrealized
      gain on available-for-sale securities
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                5,604
                                                                
                                                                
                                                                
                                                                17,418Comprehensive
      (loss) / income
                                                                
                                                                $
                                                                (3,373,815
                                                                )
                                                                
                                                                $
                                                                499,970
                                                                
                                                                
                                                                $
                                                                (5,526,426
                                                                )Basic
      net (loss) / income per common share
                                                                
                                                                $
                                                                (0.41
                                                                )
                                                                
                                                                $
                                                                0.06
                                                                
                                                                
                                                                $
                                                                (0.70
                                                                )Diluted
      net (loss) / income per common share
                                                                
                                                                $
                                                                (0.41
                                                                )
                                                                
                                                                $
                                                                0.06
                                                                
                                                                
                                                                $
                                                                (0.70
                                                                )Basic
      weighted average shares outstanding
                                                                
                                                                
                                                                8,230,355
                                                                
                                                                
                                                                
                                                                8,086,622
                                                                
                                                                
                                                                
                                                                7,887,989Diluted
      weighted average shares outstanding
                                                                
                                                                
                                                                8,230,355
                                                                
                                                                
                                                                
                                                                8,605,968
                                                                
                                                                
                                                                
                                                                7,887,989


See notes
to consolidated financial statements.




32


ONVIA,
INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS


YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006




Twelve
      Months Ended December 31,2008
                                            
                                            
                                            2007
                                            
                                            
                                            2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss) / income
                                            
                                            $
                                            (3,373,815
                                            )
                                            
                                            $
                                            494,366
                                            
                                            
                                            $
                                            (5,543,844
                                            )Adjustments
      to reconcile net (loss) / income to net cash (used in) / provided by
      operating activities:Depreciation
      and amortization
                                            
                                            
                                            1,530,310
                                            
                                            
                                            
                                            2,014,105
                                            
                                            
                                            
                                            1,075,894Impairment
      of assets
                                            
                                            
                                            96,585
                                            
                                            
                                            
                                            45,271
                                            
                                            
                                            
                                            -(Gain)
      / Loss on sale of property and equipment
                                            
                                            
                                            (217
                                            )
                                            
                                            
                                            7,310
                                            
                                            
                                            
                                            (2,430
                                            )Stock-based
      compensation
                                            
                                            
                                            718,125
                                            
                                            
                                            
                                            927,302
                                            
                                            
                                            
                                            1,257,861Change
      in operating assets and liabilities:Accounts
      receivable
                                            
                                            
                                            (252,120
                                            )
                                            
                                            
                                            (578,156
                                            )
                                            
                                            
                                            (24,903
                                            )Prepaid
      expenses and other current assets
                                            
                                            
                                            (236,651
                                            )
                                            
                                            
                                            260,052
                                            
                                            
                                            
                                            157,132Other
      assets
                                            
                                            
                                            34,706
                                            
                                            
                                            
                                            17,310
                                            
                                            
                                            
                                            68,964Accounts
      payable
                                            
                                            
                                            (1,367,895
                                            )
                                            
                                            
                                            1,765,367
                                            
                                            
                                            
                                            (372,490
                                            )Accrued
      expenses
                                            
                                            
                                            174,621
                                            
                                            
                                            
                                            251,807
                                            
                                            
                                            
                                            (76,765
                                            )Idle
      lease accrual
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,779,215
                                            )
                                            
                                            
                                            (2,758,520
                                            )Unearned
      revenue
                                            
                                            
                                            (320,647
                                            )
                                            
                                            
                                            597,891
                                            
                                            
                                            
                                            2,579,804Deferred
      rent
                                            
                                            
                                            697,655
                                            
                                            
                                            
                                            67,816
                                            
                                            
                                            
                                            (8,188
                                            )Net
      cash (used in) / provided by operating activities
                                            
                                            
                                            (2,299,343
                                            )
                                            
                                            
                                            2,091,226
                                            
                                            
                                            
                                            (3,647,485
                                            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Additions
      to property and equipment
                                            
                                            
                                            (1,577,928
                                            )
                                            
                                            
                                            (345,010
                                            )
                                            
                                            
                                            (1,070,051
                                            )Proceeds
      from sales of property and equipment
                                            
                                            
                                            2,981
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            5,192Additions
      to internal use software
                                            
                                            
                                            (3,413,462
                                            )
                                            
                                            
                                            (1,320,540
                                            )
                                            
                                            
                                            (422,390
                                            )Purchases
      of investments
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (9,044,369
                                            )
                                            
                                            
                                            (21,082,516
                                            )Sales
      of investments
                                            
                                            
                                            -
                                            
                                            
                                            
                                            8,270,000
                                            
                                            
                                            
                                            3,010,000Maturities
      of investments
                                            
                                            
                                            -
                                            
                                            
                                            
                                            8,263,300
                                            
                                            
                                            
                                            19,060,181Reimbursable
      tenant improvements
                                            
                                            
                                            2,515,800
                                            
                                            
                                            
                                            (2,663,060
                                            )
                                            
                                            
                                            -Additions
      to security deposits
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (538,070
                                            )
                                            
                                            
                                            -Return
      of security deposits
                                            
                                            
                                            3,500,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            230,548Net
      cash provided by / (used in) investing activities
                                            
                                            
                                            1,027,391
                                            
                                            
                                            
                                            2,622,251
                                            
                                            
                                            
                                            (269,036
                                            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Principal
      payments on capital lease obligations
                                            
                                            
                                            (112,821
                                            )
                                            
                                            
                                            (48,993
                                            )
                                            
                                            
                                            -Proceeds
      from exercise of stock options and purchases under employee stock purchase
      plan
                                            
                                            
                                            126,180
                                            
                                            
                                            
                                            1,206,487
                                            
                                            
                                            
                                            260,006Net
      cash provided by financing activities
                                            
                                            
                                            13,359
                                            
                                            
                                            
                                            1,157,494
                                            
                                            
                                            
                                            260,006Net
      (decrease) / increase in cash and cash equivalents
                                            
                                            
                                            (1,258,593
                                            )
                                            
                                            
                                            5,870,971
                                            
                                            
                                            
                                            (3,656,515
                                            )Cash
      and cash equivalents, beginning of period
                                            
                                            
                                            14,301,149
                                            
                                            
                                            
                                            8,430,178
                                            
                                            
                                            
                                            12,086,693Cash
      and cash equivalents, end of period
                                            
                                            $
                                            13,042,556
                                            
                                            
                                            $
                                            14,301,149
                                            
                                            
                                            $
                                            8,430,178SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Unrealized
      gain on available-for-sale investments
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            (5,604
                                            )
                                            
                                            $
                                            (17,418
                                            )Issuance
      of treasury stock for 401K matching contribution
                                            
                                            
                                            (69,634
                                            )
                                            
                                            
                                            (83,281
                                            )
                                            
                                            
                                            (62,904
                                            )Purchases
      under capital lease obligations
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (250,460
                                            )
                                            
                                            
                                            -


See notes
to consolidated financial statements.  33


ONVIA,
INC.




CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006






Common
    stock
                                                          
                                                          
                                                          Treasury
      stock
                                                          
                                                          
                                                          Additional
                                                          
                                                          
                                                          Accumulated
      other
                                                          
                                                          
                                                          AccumulatedShares
                                                          
                                                          
                                                          Amount
                                                          
                                                          
                                                          Shares
                                                          
                                                          
                                                          Amount
                                                          
                                                          
                                                          paid in
      capital
                                                          
                                                          
                                                          comprehensive
      loss
                                                          
                                                          
                                                          deficit
                                                          
                                                          
                                                          TotalBALANCE,
      January 1, 2006
                                                          
                                                          
                                                          7,836,110
                                                          
                                                          
                                                          $
                                                          784
                                                          
                                                          
                                                          
                                                          45,000
                                                          
                                                          
                                                          $
                                                          (220,950
                                                          )
                                                          
                                                          $
                                                          347,749,246
                                                          
                                                          
                                                          $
                                                          (23,022
                                                          )
                                                          
                                                          $
                                                          (333,872,120
                                                          )
                                                          
                                                          $
                                                          13,633,938Exercise
      of stock options
                                                          
                                                          
                                                          59,739
                                                          
                                                          
                                                          
                                                          6
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          166,999
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          167,005Purchases
      under Employee Stock Purchase Plan
                                                          
                                                          
                                                          20,673
                                                          
                                                          
                                                          
                                                          2
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          92,999
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          93,001Treasury
      stock issued for matching retirement plan contributions
                                                          
                                                          
                                                          12,631
                                                          
                                                          
                                                          
                                                          1
                                                          
                                                          
                                                          
                                                          (12,631
                                                          )
                                                          
                                                          
                                                          62,018
                                                          
                                                          
                                                          
                                                          884
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          62,903Noncash
      stock-based compensation
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          1,164,161
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          1,164,161Unrealized
      gain on available-for-sale investments
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          17,418
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          17,418Net
      loss
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (5,543,844
                                                          )
                                                          
                                                          
                                                          (5,543,844
                                                          )BALANCE,
      December 31, 2006
                                                          
                                                          
                                                          7,929,153
                                                          
                                                          
                                                          
                                                          793
                                                          
                                                          
                                                          
                                                          32,369
                                                          
                                                          
                                                          
                                                          (158,932
                                                          )
                                                          
                                                          
                                                          349,174,289
                                                          
                                                          
                                                          
                                                          (5,604
                                                          )
                                                          
                                                          
                                                          (339,415,964
                                                          )
                                                          
                                                          
                                                          9,594,582Exercise
      of stock options
                                                          
                                                          
                                                          244,482
                                                          
                                                          
                                                          
                                                          24
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          1,110,523
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          1,110,547Purchases
      under Employee Stock Purchase Plan
                                                          
                                                          
                                                          18,379
                                                          
                                                          
                                                          
                                                          2
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          95,938
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          95,940Treasury
      stock issued for matching retirement plan contributions
                                                          
                                                          
                                                          15,451
                                                          
                                                          
                                                          
                                                          2
                                                          
                                                          
                                                          
                                                          (15,451
                                                          )
                                                          
                                                          
                                                          75,865
                                                          
                                                          
                                                          
                                                          7,414
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          83,281Noncash
      stock-based compensation
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          879,866
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          879,866Unrealized
      gain on available-for-sale investments
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          5,604
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          5,604Net
      income
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          494,366
                                                          
                                                          
                                                          
                                                          494,366BALANCE,
      December 31, 2007
                                                          
                                                          
                                                          8,207,465
                                                          
                                                          
                                                          
                                                          821
                                                          
                                                          
                                                          
                                                          16,918
                                                          
                                                          
                                                          
                                                          (83,067
                                                          )
                                                          
                                                          
                                                          351,268,030
                                                          
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          (338,921,598
                                                          )
                                                          
                                                          
                                                          12,264,186Exercise
      of stock options
                                                          
                                                          
                                                          3,613
                                                          
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          12,834
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          12,834Purchases
      under Employee Stock Purchase Plan
                                                          
                                                          
                                                          26,913
                                                          
                                                          
                                                          
                                                          3
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          113,343
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          113,346Treasury
      stock issued for matching retirement plan contributions
                                                          
                                                          
                                                          8,837
                                                          
                                                          
                                                          
                                                          1
                                                          
                                                          
                                                          
                                                          (8,837
                                                          )
                                                          
                                                          
                                                          43,390
                                                          
                                                          
                                                          
                                                          26,244
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          69,635Noncash
      stock-based compensation
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          706,893
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          706,893Net
      loss
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (3,373,815
                                                          )
                                                          
                                                          
                                                          (3,373,815
                                                          )BALANCE,
      December 31, 2008
                                                          
                                                          
                                                          8,246,828
                                                          
                                                          
                                                          $
                                                          825
                                                          
                                                          
                                                          
                                                          8,081
                                                          
                                                          
                                                          $
                                                          (39,677
                                                          )
                                                          
                                                          $
                                                          352,127,344
                                                          
                                                          
                                                          $
                                                          0
                                                          
                                                          
                                                          $
                                                          (342,295,413
                                                          )
                                                          
                                                          $
                                                          9,793,079




See notes
to consolidated financial statements.  34


ONVIA,
INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006




Note 1:
            Summary
      of Significant Accounting Policies




Description
of Business


Onvia
(together with its subsidiary, “Onvia” or the “Company”) is a provider of
business solutions that help companies plan, market and sell to targeted markets
throughout the United States, or U.S.  Compiled over the last ten
years, Onvia Dominion®, Onvia’s proprietary database of comprehensive,
historical and real-time information provides businesses with insight and
intelligence on relevant public sector revenue opportunities and commercial and
residential development projects.  This information is classified and
linked within four key hubs of data: project history, agency research, buyer
research and competitive intelligence.  Information in Onvia’s
database has been collected, formatted and classified to help its clients
quickly find and analyze opportunities relevant to their
businesses.





Basis
of consolidation


Onvia has
a wholly-owned subsidiary in Canada; however, there was no business activity in
this subsidiary in any of the fiscal years ended December 31, 2008, 2007 or
2006.





Use
of estimates


The
preparation of financial statements in conformity with accounting Principles
generally accepted in the United States of America or GAAP requires the
Company’s management to make estimates and judgments that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Significant estimates include
the fair value of stock-based compensation and the allowance for doubtful
accounts.  The Company bases its estimates on historical experience
and on various other assumptions that it believes to be reasonable under the
circumstances. Actual results may differ significantly from the Company’s
estimates. In addition, any significant unanticipated changes in any of the
Company’s assumptions could have a material adverse effect on its business,
financial condition, and results of operations.





Revenue
recognition


Onvia’s
revenues are primarily generated from client subscriptions and content licenses
and management reports.  Our subscriptions are generally annual
contracts; however, we also offer, on a limited basis, extended multi-year
contracts to our subscription client, and content licenses are generally
multi-year agreements. Subscription fees and content licenses are recognized
ratably over the term of the agreement. Onvia also generates revenue from fees
charged for management reports, document download services, and list rental
services, and revenue from these types of services is recognized upon
delivery.





Our
subscription services and management reports are also sold together as a bundled
offering.  Pursuant to the provisions of Emerging Issues Task Force
00-21, Revenue Arrangements
with Multiple Deliverables, or EITF 00-21, we allocate revenue from these
bundled sales ratably between the subscription services and the management
reports based on established list prices for those offerings.





Unearned
revenue consists of payments received for prepaid subscriptions from our
non-enterprise clients whose terms extend into periods beyond the balance sheet
date, as well as the invoiced portion of enterprise contracts and content
licenses whose terms extend into periods beyond the balance sheet
date.





Fair
value of financial instruments


Onvia’s
financial instruments consist of cash and cash equivalents, short-term
investments, accounts receivable, security deposits, accounts payable, and
accrued liabilities. The carrying amounts of the financial instruments
approximate fair value due to their short maturities. All investments, when
held, are classified as available-for-sale and are reported at fair value based
on market quotes, and unrealized gains or losses on these investments are
recorded in stockholders’ equity and reported in comprehensive
income.




Cash
and cash equivalents


Onvia
considers all highly liquid instruments with remaining maturities at purchase of
90 days or less to be cash equivalents which are classified as
available-for-sale with any gain/loss recorded in comprehensive
income.




Management
of credit risk


Onvia is
subject to concentration of credit risk, primarily from its investments. Onvia
manages its credit risk for investments by purchasing investment-grade
securities and diversifying its investment portfolio among issuers and
maturities. To mitigate its credit risk associated with its investment portfolio
in light of the recent downturn in the financial services industry, the Company
reallocated all of its investments into a US Treasury cash reserves fund as of
December 31, 2008.




35


Property
and equipment


Equipment
and leasehold improvements are stated at cost, net of accumulated depreciation.
Depreciation expense on software, furniture, and equipment is recorded using the
straight-line method over estimated useful lives of three to five years.
Leasehold improvements are depreciated over the shorter of their useful lives or
the term of the underlying lease.





Concurrent
with the execution of a termination agreement on the lease for Onvia’s former
corporate headquarters building in the third quarter of 2007, the Company
adjusted the estimated useful lives of existing leasehold improvements such that
their remaining useful lives coincided with the revised termination date of the
Company’s lease.  As a result, depreciation on these leasehold
improvements was accelerated such that they were fully depreciated as of
December 31, 2007.  Onvia recorded $776,000 in accelerated
depreciation expense in 2007 as a result of this change.





The
Company periodically evaluates its long-lived assets for impairment in
accordance with Statement of Financial Accounting Standards, or SFAS, No. 144,
Accounting for the Impairment
or Disposal of Long-Lived Assets, or FAS 144. FAS 144 requires that an
impairment loss be recognized for assets to be disposed of or held-for-use when
the carrying amount of an asset is deemed to not be recoverable. If events or
circumstances indicate that any of the Company’s long-lived assets might be
impaired, the Company analyzes the estimated undiscounted future cash flows to
be generated from the applicable asset. In addition, the Company records an
impairment loss to the extent that the carrying value of the asset exceeds the
fair value of the asset. Fair value is generally determined using an estimate of
discounted future net cash flows from operating activities or upon disposal of
the asset.  No assets were impaired during the years ended December
31, 2008, 2007 or 2006.




Internal
Use Software


AICPA
Statement of Position, or SOP, No. 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, requires all costs
related to the development of internal use software other than those incurred
during the application development stage to be expensed as incurred. Costs
incurred during the application development stage are required to be capitalized
and amortized over the estimated useful life of the software. Capitalized
software costs are amortized on a straight-line basis over their expected
economic lives, typically 3 to 5 years. Pursuant to FAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, Onvia periodically evaluates the remaining
useful lives of internal use software and will record an abandonment if
management determines that all or a portion of the asset will no longer be used
or will adjust the remaining useful life to reflect revised estimates for
impairment in accordance with FAS 144 as described above under “Property and
equipment”.





Income
taxes


Onvia
accounts for income taxes using the asset and liability method. Under this
method, deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis, and for net operating loss, or NOL, carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in


the years
in which those temporary differences are expected to be recovered or settled. A
valuation allowance has been established for the full amount of the net deferred
tax assets as the Company has determined that the recognition criteria for
realization have not been met.





Utilization
of the NOL carryforwards may be subject to a substantial annual limitation due
to ownership change limitations that may have occurred previously or that could
occur in the future provided by Section 382 of the Internal Revenue Code of
1986, as amended (the “Code”). These ownership changes may limit the amount of
NOL carryforwards that can be utilized annually to offset future taxable income
and tax, respectively. In general, an ownership change, as defined by Section
382 of the Code, results from transactions increasing the ownership of certain
stockholders or public groups in the stock of a corporation by more than 50
percentage points over a three-year period.





Onvia
plans to complete a Section 382 analysis regarding ownership changes that may
have occurred, but at this time the Company cannot reasonably estimate whether
such a change has occurred.  Any carryforwards that will expire prior
to utilization as a result of such limitations will be removed from deferred tax
assets with a corresponding reduction of the valuation allowance.





36


Onvia
currently has a full valuation allowance for its deferred tax assets as the
future realization of the tax benefit is not more likely than
not.  Based on information currently available, Onvia does not
reasonably believe that the unrecognized tax benefit will change significantly
within the next twelve months.




Treasury
stock


Onvia
accounts for treasury stock using the cost method.  As of December 31,
2008, the Company held 8,081 shares of treasury stock with a cost basis of
$39,677.  The Company holds the treasury shares to fund matching
contributions to its 401K retirement plan for employee
contributions.  In February 2008, the Company issued 8,837 treasury
shares to fund matching contributions for 2007 employee contributions, and in
March 2009, the Company issued 8,055 treasury shares to fund matching
contributions for 2008 employee contributions.




Other
comprehensive income or loss


Comprehensive
income or loss is the change in equity from transactions and other events and
circumstances other than those resulting from investments by and distributions
to owners. Other comprehensive loss for Onvia consists of unrealized gains and
losses on available-for-sale investments.




Net
income or loss per share


Basic
earnings per share are calculated by dividing net income or loss for the period
by the weighted average shares of common stock outstanding for the
period.  Diluted earnings per share are calculated by dividing net
income per share by the weighted average common stock outstanding for the period
plus dilutive potential common shares using the treasury stock
method.  In periods with a net loss, basic and diluted earnings per
share are identical because inclusion of potentially dilutive common shares
would be antidilutive.




The following
table sets forth the computation of basic and diluted net income per share for
the years ended December


31:





2008
                                                
                                                
                                                2007
                                                
                                                
                                                2006Numerator:Net
      (loss) / income
                                                
                                                $
                                                (3,373,815
                                                )
                                                
                                                $
                                                494,366
                                                
                                                
                                                $
                                                (5,543,844
                                                )Denominator:Shares
      used to compute basic net (loss) / income per share
                                                
                                                
                                                8,230,355
                                                
                                                
                                                
                                                8,086,622
                                                
                                                
                                                
                                                7,887,989Dilution
      associated with the Company's stock-based compensation
    plans
                                                
                                                
                                                -
                                                
                                                
                                                
                                                519,346
                                                
                                                
                                                
                                                -Shares
      used to compute diluted net (loss) / income per share
                                                
                                                
                                                8,230,355
                                                
                                                
                                                
                                                8,605,968
                                                
                                                
                                                
                                                7,887,989Basic
      net (loss) / income per share
                                                
                                                $
                                                (0.41
                                                )
                                                
                                                $
                                                0.06
                                                
                                                
                                                $
                                                (0.70
                                                )Diluted
      net (loss) / income per share
                                                
                                                $
                                                (0.41
                                                )
                                                
                                                $
                                                0.06
                                                
                                                
                                                $
                                                (0.70
                                                )


For the
year ended December 31, 2007, options and warrants to purchase 835,860 shares of
common stock with exercise prices greater than the twelve month average fair
market value of our stock of $7.88 were not included in the calculation because
the effect would have been anti-dilutive.  Comparatively, for the
years ended December 31, 2008 and 2006 options and warrants to purchase
1,966,323 and 2,133,035 shares of common stock, respectively, are excluded from
the calculation because they would have been anti-dilutive since Onvia was in a
net loss position in those periods.




New
accounting pronouncements


In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
No. 141(R)”).. In SFAS No. 141(R), the FASB retained the fundamental
requirements of SFAS No. 141 to account for all business combinations using the
acquisition method and for an acquiring entity to be identified in all business
combinations. However, the revised standard requires the acquiring entity in a
business combination to recognize all the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to immediately expense costs related to the acquisition.
SFAS No. 141(R) is effective for annual periods beginning on or after December
15, 2008. The impact that SFAS No. 141(R) will have on Onvia’s consolidated
financial statements when effective will depend upon the nature, terms and size
of the acquisitions completed after the effective date.





37


On
January 1, 2008, we adopted the provisions of SFAS No. 157 which defines fair
value, establishes a framework for measuring fair value and expands disclosure
of fair value measurements. SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and accordingly,
does not require any new fair value measurements. On February 12, 2008, the FASB
issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No.
157 , which delayed the effective date of SFAS No. 157 for nonfinancial
assets and nonfinancial liabilities to fiscal years beginning after November 15,
2008. The adoption of SFAS No. 157 for financial assets and liabilities did not
have a material impact on Onvia’s financial position, cash flows, or results of
operations. We are currently evaluating the remaining provisions of SFAS No. 157
to determine what effect its adoption on January 1, 2009 for nonfinancial assets
and nonfinancial liabilities will have on the Company’s financial position, cash
flows, and results of operations.





In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities.
This FSP is effective for fiscal years beginning after December 15, 2008. This
FSP classifies unvested share-based payment grants containing non-forfeitable
rights to dividends as participating securities that will be included in the
computation of earnings per share. As of December 31, 2008, Onvia had no
unvested share-based payment grants with non-forfeitable dividend rights. The
Company adopted FSP EITF 03-6-1 on January 1, 2009, but does not expect the
adoption of this FSP to have a material impact on its financial position, cash
flows or results of operations.





Note 2:
            Stock-Based
      Compensation and Stock Option
Activity





Pursuant
to the provisions of SFAS No. 123R, Share Based Payment, or FAS
123R, Onvia measures compensation cost for all stock-based awards at fair value
on the date of grant. The fair value of stock options is determined using the
Black-Scholes valuation model.  Such value is recognized as expense
over the service period, net of estimated forfeitures. The estimation of stock
awards that will ultimately vest requires judgment, and to the extent actual
results or updated estimates differ from the Company’s current estimates, such
amounts will be recorded as a cumulative adjustment in the period estimates are
revised. Management considers many factors when estimating expected forfeitures,
including employee class, historical experience and expected future activity.
Actual results, and future changes in estimates, may differ substantially from
management’s current estimates.





Stock-Based Benefit
Plans





1999
Stock Option Plan


The 1999
Stock Option Plan, or the 1999 Plan, was originally adopted in February 1999 and
provided for the issuance of incentive and nonqualified common stock options to
employees, directors and consultants of Onvia.  This plan was amended
in September 2008 by the Onvia, Inc. 2008 Equity Incentive Plan, or the 2008
Plan (discussed below).  All shares available for future issuance
under the 1999 Plan were transferred to the 2008 Plan on the amendment
date.  Options granted under the 1999 Plan expire 10 years after the
date of grant.  The options vest in increments over time, but
typically have either a four or five year vesting schedule, normally with 25% or
20%, respectively, vesting one year from the grant date and ratable monthly
vesting thereafter.  The total number of outstanding options under the 1999
Plan as of December 31, 2008 was 1,841,032 shares.





Onvia,
Inc. 2008 Equity Incentive Plan


On
September 5, 2008, Onvia’s stockholders approved the amendment and restatement
of the 1999 Plan, as the Onvia, Inc. 2008 Equity Incentive Plan, or the 2008
Plan.  The amendment resulted in the following: (1) increased the
number of shares reserved for issuance by 190,000 shares; (2) expanded the types
of awards available from only stock options to stock awards, restricted stock,
restricted stock units and stock appreciation rights, as well as stock options;
(3) provided that awards could be granted for ten years after the adoption of
the 2008 Plan; (4) required that the exercise price for all options to be at
least 100% of the fair market value of the underlying shares on the date of
grant; (5) expanded the specific provisions that govern awards in the event of a
change in control; and (5) provided for compliance with the requirements of
Section 409A of the Internal Revenue Code to the extent that awards are treated
as deferred compensation.  All employees, officers, directors and
consultants of Onvia are eligible to participate in the 2008 Plan, although it
is not anticipated that every eligible employee or consultant will receive
awards.  Options under this plan vest in increments over time, but
typically have either a four or five year vesting schedule, normally with 25% or
20%, respectively, vesting one year from the grant date and ratable monthly
vesting thereafter.  The total number of options outstanding and the
number of shares available for issuance under the 2008 Plan as of December 31,
2008 were 21,350 and 387,993, respectively.





38


2000
Directors’ Stock Option Plan


In March
2000, Onvia adopted a Directors’ Stock Option Plan or the “Directors’ Plan”.
Grants were made under this plan to each eligible board member on the date such
person was first elected or appointed as a board member.  At each
annual stockholders’ meeting, each non-employee director was granted an
additional option to purchase 1,000 shares of common stock under the Directors’
Plan, provided such person had been a board member of Onvia for at least the
prior six months. The initial option grant under the Directors’ Plan vested 25%
each year for four years on the anniversary of the date of grant, had a term of
ten years and an exercise price equal to the closing price of Onvia’s stock on
the grant date. The annual grants vest in full one year from the date of grant,
have a ten year life and an exercise price equal to the closing price on the
date of grant. As of December 31, 2008, all shares available for issuance under
the Directors’ Plan have been granted. Accordingly, on October 23, 2008, the
Board of Directors approved the stock option grants with the same terms
described above (historically made under our Directors’ Plan) under the
Company’s 2008 Equity Incentive Plan, which was approved by our stockholders on
September 5,
2008.





Employee
Stock Purchase Plan


In May
2000, Onvia adopted the 2000 Employee Stock Purchase Plan, or ESPP, and
initially authorized 60,000 shares of common stock for issuance under the ESPP.
Each year, the number of shares authorized for issuance under the ESPP is
increased by the lesser of: 1% of the total number of shares of common stock
then outstanding; 60,000 shares; or a lesser number of shares as determined by
the Board of Directors. Under the ESPP, an eligible employee may purchase shares
of Onvia common stock, based on certain limitations, at a price equal to the
lesser of 85% of the fair market value of the common stock at the beginning or
end of the respective offering period. This plan is compensatory under the
provisions of FAS 123R and the fair value of purchases under the ESPP is
recognized as compensation expense over the term of the awards. The ESPP
purchases shares on a semi-annual basis.  The total number of shares
authorized for future issuance under the ESPP as of December 31, 2008 was
419,385 shares.


`


Impact of the Adoption of
FAS 123R





The
impact on Onvia’s results of operations of recording stock-based compensation
for the years ended December 31, 2008, 2007 and 2006 was as
follows:




2008
                                
                                
                                2007
                                
                                
                                2006Cost
      of sales
                                
                                $
                                9,687
                                
                                
                                $
                                14,013
                                
                                
                                $
                                25,063Sales
      and marketing
                                
                                
                                199,042
                                
                                
                                
                                311,256
                                
                                
                                
                                477,533Technology
      and development
                                
                                
                                133,498
                                
                                
                                
                                125,660
                                
                                
                                
                                103,927General
      and administrative
                                
                                
                                375,898
                                
                                
                                
                                476,373
                                
                                
                                
                                651,338Total
      stock-based compensation
                                
                                $
                                718,125
                                
                                
                                $
                                927,302
                                
                                
                                $
                                1,257,861





Valuation
Assumptions





Onvia
calculated the fair value of each option award on the date of grant using the
Black-Scholes valuation model.  The following weighted average
assumptions were used for options granted in the years ending December
31:





2008
                                        
                                        
                                        2007
                                        
                                        
                                        2006Average
      risk free rate
                                        
                                        
                                        2.55
                                        %
                                        
                                        
                                        4.15
                                        %
                                        
                                        
                                        4.52
                                        %Volatility
                                        
                                        
                                        40
                                        %
                                        
                                        
                                        44
                                        %
                                        
                                        
                                        59
                                        %Dividends
                                        
                                        
                                        0
                                        %
                                        
                                        
                                        0
                                        %
                                        
                                        
                                        0
                                        %Expected
      life (in years)
                                        
                                        
                                        4.8
                                        
                                        
                                        
                                        4.7
                                        
                                        
                                        
                                        5.0




39


The fair
value of each employee purchase under the ESPP is estimated on the first day of
each purchase period using the Black-Scholes valuation
model.  Purchase periods begin on May 1 and November 1 of each
year.  The following weighted average assumptions were used for
purchase periods beginning during the years ended December 31 under the
ESPP:





2008
                              
                              
                              2007
                              
                              
                              2006Average
      risk free rate
                              
                              
                              1.32
                              %
                              
                              
                              4.03
                              %
                              
                              
                              5.08
                              %Volatility
                              
                              
                              47
                              %
                              
                              
                              25
                              %
                              
                              
                              39
                              %Dividends
                              
                              
                              0
                              %
                              
                              
                              0
                              %
                              
                              
                              0
                              %Expected
      life (in years)
                              
                              
                              0.5
                              
                              
                              
                              0.5
                              
                              
                              
                              0.5





Risk-Free
Interest Rate


The
average risk free interest rate was determined based on the market yield for
U.S. Treasury securities for the expected term of the grant at the time of
grant.





Expected
Volatility


FAS 123R
requires companies to estimate expected volatility over the expected term of the
options granted.


Management
used the historical volatility of Onvia’s common stock to estimate the future
volatility of its common stock for purposes of estimating the fair value of
options granted during 2008.





Dividends


Management
does not currently intend to pay dividends; therefore, this assumption is set at
0%.





Expected
Life


Onvia’s
computation of expected life was determined based on historical experience of
similar awards, giving consideration to the contractual terms of the awards,
vesting schedules and expectations of future employee
behavior.  Onvia’s historical experience is limited, because the
Company does not have complete life-cycle information on any of its options;
therefore, management was required to estimate future exercise and cancellation
behavior, generally by assuming that remaining shares would be exercised or
cancelled ratably over their remaining contractual term, adjusted for certain
expectations of future employee behavior.  Management examined the
behavior patterns separately for groups of employees that have similar
historical experience.





Stock Option
Activity





The
following table summarizes activity under Onvia’s equity incentive plans for the
year ended December 31, 2008:





Options
      Outstanding
                                    
                                    
                                    Weighted
      Average Exercise Price
                                    
                                    
                                    Weighted
      Average Remaining Contractual Term (in years)
                                    
                                    
                                    Aggregate Intrinsic Value(1)Total
      options outstanding at December 31, 2007
                                    
                                    
                                    1,847,563
                                    
                                    
                                    $
                                    8.55Options
      granted
                                    
                                    
                                    179,850
                                    
                                    
                                    
                                    7.29Options
      exercised
                                    
                                    
                                    (3,613
                                    )
                                    
                                    
                                    3.55Options
      forfeited and cancelled
                                    
                                    
                                    (107,418
                                    )
                                    
                                    
                                    7.85Total
      options outstanding at December 31, 2008
                                    
                                    
                                    1,916,382
                                    
                                    
                                    $
                                    8.48
                                    
                                    
                                    
                                    5.52
                                    
                                    
                                    $
                                    417,051Options
      exercisable at December 31, 2008
                                    
                                    
                                    1,405,824
                                    
                                    
                                    $
                                    8.42
                                    
                                    
                                    
                                    4.75
                                    
                                    
                                    $
                                    416,851Options
      vested and expected to vest at December 31, 2008
                                    
                                    
                                    1,808,700
                                    
                                    
                                    $
                                    8.46
                                    
                                    
                                    
                                    5.40
                                    
                                    
                                    $
                                    417,018


(1)Aggregate intrinsic value is calculated as the difference between the
exercise price of the underlying awards and the quoted price of Onvia’s common
stock of $3.42 at December 31, 2008 for options that were in-the-money at
December 31, 2008.  The number of in-the-money options outstanding and
exercisable at December 31, 2008 was 461,272 and 451,272,
respectively.





The
weighted average grant date fair value of options granted during the years ended
December 31, 2008, 2007 and 2006 was $2.13, $2.85 and $2.40 per share,
respectively.  The total intrinsic value of options exercised during
the years ended December 31, 2008, 2007 and 2006 was $25,102, $740,269 and
$157,315, respectively.





As of
December 31, 2008, there was approximately $597,963 of unrecognized compensation
cost related to unvested stock options and estimated purchases under the
ESPP.  That cost is expected to be recognized over a weighted average
period of 1.29 years.





During
the year ended December 31, 2008, approximately $126,000 was received for
exercises of stock options and purchases under Onvia’s ESPP.





40


Note 3:
            Prepaid Expenses and Other
      Current Assets





Prepaid
expenses and other current assets consist of the following at December
31:


December
      31,
                                        
                                        
                                        December
      31,2008
                                        
                                        
                                        2007Prepaid
      expenses
                                        
                                        $
                                        775,281
                                        
                                        
                                        $
                                        510,899Interest
      and other receivable
                                        
                                        
                                        4,556
                                        
                                        
                                        
                                        32,287Other
                                        
                                        
                                        6,080
                                        
                                        
                                        
                                        6,080Total
      prepaid expenses and other assets
                                        
                                        $
                                        785,917
                                        
                                        
                                        $
                                        549,266





Note 4:
            Security
      Deposits





Pursuant
to the lease obligation for Onvia’s former corporate headquarters building the
Company was required to maintain a deposit in the amount of $3.5 million through
the remaining term of the lease, which originally expired in April 2010;
however, in July 2007 the Company executed an agreement with its landlord to
terminate the lease obligation on that building effective January 11,
2008.   The $3.5 million security deposit was returned to the
Company in March 2008 as a result of this termination.





Pursuant
to Onvia’s new lease for corporate office space, Onvia provided a security
deposit of $538,000, which will be reduced annually on a straight line basis
over a four year period beginning with the first anniversary of the commencement
date. In March 2009, $135,000 was returned to the Company, representing the
first of the four annual reductions.




Note 5:
            Property
      and Equipment




Property
and equipment consists of the following at December 31:


2008
                            
                            
                            2007Computer
      equipment
                            
                            $
                            2,629,459
                            
                            
                            $
                            2,756,950Software
                            
                            
                            1,058,671
                            
                            
                            
                            1,074,441Furniture
      and fixtures
                            
                            
                            97,873
                            
                            
                            
                            530,825Leasehold
      improvements
                            
                            
                            706,088
                            
                            
                            
                            2,803,9904,492,091
                            
                            
                            
                            7,166,206Less
      accumulated depreciation and amortization
                            
                            
                            (2,781,945
                            )
                            
                            
                            (6,209,017
                            )Net
      book value
                            
                            $
                            1,710,146
                            
                            
                            $
                            957,189




As a
result of the termination of Onvia’s office lease on its former corporate
headquarters building in 2007, the Company adjusted the remaining useful life of
its existing leasehold improvements to coincide with the revised termination
date of its lease.  As a result, these assets were fully depreciated
as of December 31, 2007. In January 2008, Onvia disposed of these leasehold
improvements and recorded a reduction of $2.8 million to leasehold improvements
and accumulated depreciation. Property and equipment includes $224,000 in
computer equipment under capital leases at both December 31, 2008 and
2007.  Accumulated depreciation on these leased assets was $120,000
and $45,000 at December 31, 2008 and 2007, respectively.





Note 6:
            Accrued
      Expenses




Accrued
expenses consist of the following at December 31:


December
      31,
                              
                              
                              December
      31,2008
                              
                              
                              2007Payroll
      and related liabilities
                              
                              $
                              1,172,038
                              
                              
                              $
                              1,143,575Accrued
      professional fees
                              
                              
                              49,370
                              
                              
                              
                              111,561State
      income and other taxes payable
                              
                              
                              269,258
                              
                              
                              
                              79,615Total
      accrued expenses
                              
                              $
                              1,490,666
                              
                              
                              $
                              1,334,751





41


State and
other taxes payable includes $191,000 for sales taxes owed to the State of
Texas. Onvia had outside sales representatives located in Texas during 2001 to
2003 and again from 2004 to 2006, creating nexus for Onvia in Texas during these
periods.  Onvia did not collect sales tax from its clients during this
time, because it believed its services were proprietary and, thus, not subject
to sales tax.  Onvia received a determination letter from Texas in May
2008 indicating that its services were taxable in Texas.





Note 7:                Interest
and Other Income, net




Net
interest and other income consisted of the following for the years ended
December 31:




2008
                          
                          
                          2007
                          
                          
                          2006Interest
      income
                          
                          $
                          447,493
                          
                          
                          $
                          1,008,733
                          
                          
                          $
                          968,551Interest
      expense
                          
                          
                          (20,468
                          )
                          
                          
                          (15,561
                          )
                          
                          
                          -Letter
      of credit fees
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (17,993
                          )Other
      (expense) / income
                          
                          
                          6,128
                          
                          
                          
                          (10,891
                          )
                          
                          
                          1,917Total
      interest and other income, net
                          
                          $
                          433,153
                          
                          
                          $
                          982,281
                          
                          
                          $
                          952,475





Note 8:
            Income
      Taxes




At
December 31, 2008 and 2007, Onvia had tax net operating loss carryforwards of
$250,015,430 and $247,081,988, respectively, which may be used to offset future
taxable income. The remaining carryforwards expire at various dates beginning in
2013 through 2028. The utilization of the net operating loss may be subject to
annual limitations due to ownership changes of stock in prior
years.





The
provision for income taxes is different from that which would be obtained by
applying the statutory federal income tax rate as follows:




Year
      ended
                                                
                                                
                                                Year
      ended
                                                
                                                
                                                Year
      endedDecember
      31,
                                                
                                                
                                                December
      31,
                                                
                                                
                                                December
      31,2008
                                                
                                                
                                                2007
                                                
                                                
                                                2006Tax
      (benefit) / expense at statutory rate
                                                
                                                
                                                (34.0
                                                %)
                                                
                                                
                                                34.0
                                                %
                                                
                                                
                                                (34.0
                                                %)Stock-based
      compensation
                                                
                                                
                                                3.1
                                                %
                                                
                                                
                                                (15.1
                                                %)
                                                
                                                
                                                2.7
                                                %Amortization
      of Goodwill
                                                
                                                
                                                (0.5
                                                %)
                                                
                                                
                                                (3.4
                                                %)
                                                
                                                
                                                (0.2
                                                %)Other
                                                
                                                
                                                1.2
                                                %
                                                
                                                
                                                6.9
                                                %
                                                
                                                
                                                0.4
                                                %Increase
      / (decrease) in Valuation Allowance
                                                
                                                
                                                30.2
                                                %
                                                
                                                
                                                (22.4
                                                %)
                                                
                                                
                                                31.1
                                                %0.0
                                                %
                                                
                                                
                                                0.0
                                                %
                                                
                                                
                                                0.0
                                                %




42


Onvia’s
net deferred tax assets, calculated by applying the U.S. federal statutory
income tax rate of 34% to total deferrals, consist of the following at December
31:


December
      31,
                                        
                                        
                                        December
      31,2008
                                        
                                        
                                        2007Net
      operating loss carryforward
                                        
                                        $
                                        85,005,247
                                        
                                        
                                        $
                                        84,007,877Prepaid
      expenses and other assets currently deductible
                                        
                                        
                                        (225,570
                                        )
                                        
                                        
                                        (128,249
                                        )Accrued
      expenses not currently deductible
                                        
                                        
                                        1,300,279
                                        
                                        
                                        
                                        815,507Depreciation
      different for tax purposes
                                        
                                        
                                        (214,436
                                        )
                                        
                                        
                                        1,397,935Net
      deferred tax asset
                                        
                                        
                                        85,865,520
                                        
                                        
                                        
                                        86,093,070Less:  Valuation
      allowance
                                        
                                        
                                        (85,865,520
                                        )
                                        
                                        
                                        (86,093,070
                                        )Net
      deferred tax asset
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -





Onvia has
recorded a full valuation allowance equal to the net deferred tax asset balance
based upon management’s determination that the realization is not more likely
than not.




Note 9:
            Idle
      Lease Accrual




In July
2007, Onvia entered into a Tri-Party Agreement with its landlord and a
third-party to terminate Onvia’s obligations under its former office
lease.  The termination was effective January 11, 2008.  As
a result of the lease termination, Onvia reversed approximately $2.7 million of
its idle lease accrual during the third quarter of 2007.  The reversal
represented the remaining idle lease obligation from the January 2008
termination date through the April 2010 expiration date of the original
lease.





There was
no activity in this accrual in the year ended December 31, 2008. The following
table displays a rollforward of the idle lease accrual for the years ended
December 31, 2008, 2007 and 2006:


AmountsAccruals
      at
                              
                              
                              
                              
                              
                              Paid,
      Net
                              
                              
                              Accruals
      atDecember
      31,
                              
                              
                              2006
                              
                              
                              of
      Sublease
                              
                              
                              December
      31,2005
                              
                              
                              Reduction
                              
                              
                              Income
                              
                              
                              2006Idle
      lease charges
                              
                              $
                              6,537,735
                              
                              
                              $
                              (66,691
                              )
                              
                              $
                              (2,691,829
                              )
                              
                              $
                              3,779,215AmountsAccruals
      at
                              
                              
                              
                              
                              
                              
                              Paid,
      Net
                              
                              
                              Accruals
      atDecember
      31,
                              
                              
                              2007
                              
                              
                              of
      Sublease
                              
                              
                              December
      31,2006
                              
                              
                              Reduction
                              
                              
                              Income
                              
                              
                              2007Idle
      lease charges
                              
                              $
                              3,779,215
                              
                              
                              $
                              (2,652,550
                              )
                              
                              $
                              (1,126,665
                              )
                              
                              $
                              -






Note
      10:
            Commitments
      and Contingencies




Operating
leases


As
discussed in Note 9, Onvia terminated its non-cancellable operating lease on its
former corporate headquarters building effective January 11,
2008.  Concurrent with the termination of its former office space
lease, Onvia entered into a new non-cancellable operating lease for office space
in a different location, which expires in October 2015.  Rent was
abated for the first nine months of the new office lease; however, rent expense
is being recognized on a straight-line basis over the term of the
lease.





Total
rent expense was $835,057, $1,027,664 and $898,716 for the years ended December
31, 2008, 2007 and 2006, respectively, excluding idle lease
charges.




Onvia
also has a non-cancellable operating lease for office equipment, which expires
in January 2010.




43


Future
minimum lease payments required on noncancellable operating leases are as
follows for the years ending December 31:


Real
      Estate
                                    
                                    
                                    Other
                                    
                                    
                                    TotalOperating
      Leases
                                    
                                    
                                    Operating
      Leases
                                    
                                    
                                    Operating
      Leases2009
                                    
                                    $
                                    899,063
                                    
                                    
                                    $
                                    18,670
                                    
                                    
                                    $
                                    917,7332010
                                    
                                    
                                    926,034
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    926,0342011
                                    
                                    
                                    953,815
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    953,8152012
                                    
                                    
                                    982,430
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    982,4302013
                                    
                                    
                                    1,011,903
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,011,903Thereafter
                                    
                                    
                                    1,936,431
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,936,431$
                                    6,709,676
                                    
                                    
                                    $
                                    18,670
                                    
                                    
                                    $
                                    6,728,346




Capital
Leases


In June
2007, Onvia entered into non-cancellable capital leases for server equipment and
maintenance related to this equipment.  Remaining future minimum lease
payments required on these capital leases are as follows for the years ending
December 31:





Capital
      LeasesPrincipal
                          
                          
                          Interest
                          
                          
                          Total2009
                          
                          $
                          82,472
                          
                          
                          $
                          5,887
                          
                          
                          $
                          88,3592010
                          
                          
                          6,174
                          
                          
                          
                          197
                          
                          
                          
                          6,371Thereafter
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -$
                          88,646
                          
                          
                          $
                          6,084
                          
                          
                          $
                          94,730





Purchase
Obligations


Onvia has
noncancellable purchase obligations for software development agreements,
co-location hosting arrangements, telecom agreements, marketing agreements and
third-party content agreements. The agreements expire in dates ranging from 2009
to 2012. Future
required payments under these non-cancellable agreements are as follows for the
years ending December 31:





PurchaseObligations2009
                            
                            $
                            1,353,9532010
                            
                            
                            428,852Thereafter
                            
                            
                            -$
                            1,782,805




Legal
Proceedings





Class
Action Securities Litigation


In 2001,
five securities class action suits were filed against Onvia, certain former
executive officers, and the lead underwriter of Onvia’s Initial Public Offering,
or IPO, Credit Suisse First Boston, or CSFB.  The suits were filed in the
U.S. District Court for the Southern District of New York on behalf of all
persons who acquired securities of Onvia between March 1, 2000 and December 6,
2000.  In 2002, a consolidated complaint was filed.  The complaint
charged defendants with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 (and Rule 10b-5 promulgated thereunder) and Sections 11 and
15 of the Securities Act of 1933, for issuing a Registration Statement and
Prospectus that failed to disclose and contained false and misleading statements
regarding certain commissions purported to have been received by the
underwriters, and other purported underwriter practices in connection with their
allocation of shares in the offering.  The complaint sought an undisclosed
amount of damages, as well as attorneys’ fees.  This action is being
coordinated with approximately 300 other nearly identical actions filed against
other companies.




On
December 5, 2006, the Court of Appeals for the Second Circuit vacated a decision
by the district court granting class certification in six of the coordinated
cases, which are intended to serve as test, or “focus,” cases.  The
plaintiffs selected these six cases, which do not include Onvia.  On April
6, 2007, the Second Circuit denied a petition for rehearing filed by the
plaintiffs, but noted that the plaintiffs could ask the district court to
certify more narrow classes than those that were rejected.  On August
14, 2007, the plaintiffs filed amended complaints in the six focus
cases.  On September 27, 2007, the plaintiffs moved to certify classes
in the six focus cases.  The six focus case issuers and the underwriters
named as defendants in the focus cases filed motions to dismiss the amended
complaints against them.  On March 26, 2008, the District Court dismissed
the Section 11 claims of those members of the putative classes in the focus
cases who sold their securities for a price in excess of the initial offering
price and those who purchased outside the previously certified class
period.  With respect to all other claims, the motions to dismiss were
denied.  On October 10, 2008, at the request of the plaintiffs, the
plaintiffs’ motion for class certification was withdrawn, without
prejudice.




44


The
parties in the approximately 300 coordinated class actions, including Onvia, the
underwriter defendants in the Onvia class action, and the plaintiffs in the
Onvia class action, have reached an agreement in principle under which the
insurers for the issuer defendants in the coordinated cases will make the
settlement payment on behalf of the issuers, including Onvia.  The
settlement is subject to approval by the parties, termination by the parties
under certain circumstances, and Court approval.  There is no
assurance that the settlement will be concluded or that the Court will approve
the settlement.




Due to
the inherent uncertainties of litigation, we cannot accurately predict the
ultimate outcome of this matter.   If the settlement is not concluded
or approved and Onvia is found liable, we are unable to estimate or predict the
potential damages that might be awarded, whether such damages would be greater
than Onvia’s insurance coverage, and whether such damages would have a material
impact on our results of operations or financial condition in any future
period.




On
October 2, 2007, Vanessa Simmonds, a purported stockholder of the Company, filed
suit in the U.S. District Court for the Western District of Washington against
Credit Suisse Group, JPMorgan Chase & Co. and Bank of America Corporation,
the lead underwriters of the Company's initial public offering in March 2000,
alleging violations of Section 16(b) of the Securities Exchange Act of 1934. The
complaint alleges that the combined number of shares of the Company's common
stock beneficially owned by the lead underwriters and certain unnamed officers,
directors, and principal stockholders exceeded ten percent of its outstanding
common stock from the date of the Company's initial public offering on March 2,
2000, through at least February 28, 2001. It further alleges that those entities
and individuals were thus subject to the reporting requirements of Section 16(a)
and the short-swing trading prohibition of Section 16(b), and failed to comply
with those provisions. The complaint seeks to recover from the lead underwriters
any "short-swing profits" obtained by them in violation of Section 16(b). The
Company was named as a nominal defendant in the action, but has no liability for
the asserted claims. No directors or officers of the Company are named as
defendants in this action. On October 29, 2007, the case was reassigned to Judge
James L. Robart along with fifty-four other Section 16(b) cases seeking recovery
of short-swing profits from underwriters in connection with various initial
public offerings. On February 25, 2008, Ms. Simmonds filed an Amended Complaint
asserting substantially similar claims as those set forth in the initial
complaint. The Company waived service. On July 25, 2008, the Company joined with
29 other issuers to file the Issuer Defendants' Joint Motion to
Dismiss. Underwriter Defendants also filed a Joint Motion to Dismiss on
July 25, 2008. Plaintiff filed oppositions to both motions on September 8, 2008.
All replies in support of the motions to dismiss were filed on October 23,
2008. Oral argument on the motions to dismiss  was held on
January 16, 2009.  On March 12, 2009, the Court granted the Issuer
Defendants' Joint Motion to Dismiss, dismissing the complaint without prejudice
on the grounds that  Ms. Simmonds had failed to make an adequate
demand on the Company prior to filing her complaint.  In its order, the
Court stated it would not permit Plaintiff to amend her demand letters while
pursuing her claims in the litigation.  Because the Court dismissed
the case on the ground that it lacked subject matter jurisdiction, it did not
specifically reach the issue of whether Plaintiff's claims were barred by the
applicable statute of limitations.  However, the Court also granted the
Underwriters' Joint Motion to Dismiss with respect to cases involving
non-moving issuers, holding that the cases were barred by the applicable statute
of limitations because the issuers' shareholders had notice of the
potential claims more than five years prior to filing suit.  It is not
clear at this time whether the Plaintiff intends to appeal the dismissal of her
claims.   We believe that the outcome of this litigation will not
have a material adverse impact on our consolidated financial position and
results of operations.




Potential
Future Litigation


In
addition, from time to time the Company is subject to various other legal
proceedings that arise in the ordinary course of business. While management
believes that the disposition of these matters will not have a material adverse
effect on the financial position, results of operations, or cash flows of the
Company, the ultimate outcomes are inherently uncertain.




Note 11:
            Employee
      Retirement Plan




In March
2000, Onvia adopted a Savings and Retirement Plan (the “Retirement Plan”) which
is a defined contribution plan. The Retirement Plan is a qualified salary
reduction plan in which all eligible employees may elect to have a percentage of
their pre-tax compensation contributed to the Retirement Plan, subject to
certain guidelines issued by the Internal Revenue Service.




In
January 2006, the Retirement Plan was amended to add a discretionary matching
contribution, made in Onvia common stock, up to 25% of every dollar up to 6% of
all eligible employee contributions. The matching contributions are subject to a
four year vesting schedule, with vesting measured from the employee’s date of
hire. The Company’s Board of Directors have the sole discretion to make matching
contributions in the first quarter following each Plan year, and employees must
be employed on the last day of the Plan year to be eligible to receive the
matching contribution.  In February 2008, Onvia transferred 8,837
shares from treasury stock into the Retirement Plan to match 2007 employee
contributions and in March 2009, Onvia transferred 8,055 shares from
treasury stock into the Retirement Plan to match 2008 employee
contributions.  The Company recorded $50,928 and $58,864 in non-cash
stock-based compensation in 2008 and 2007, respectively, related to this
match.





45


Note 12:                      Stockholders’
Equity




Authorized
shares


At
December 31, 2008, the number of authorized shares is 13,000,000 with a par
value of $0.0001 per share.  Authorized shares are comprised of
11,000,000 shares of common stock and 2,000,000 shares of undesignated preferred
stock.




Warrants
to purchase Series A preferred stock


As of
December 31, 2008 and 2007, 49,941 warrants to purchase shares of Series A
preferred stock at $9.00 per share were outstanding.  These warrants
were issued during 1999 in conjunction with the Company’s subordinated debt
financing and expire in 2009. These warrants are eligible for the cash
distribution of $3.90 per share approved by Onvia’s Board of Directors in March
2002 if they are exercised in the future. None of these warrants were exercised
during the years ended December 31, 2008, 2007 or 2006. Onvia has not recorded a
liability for the potential future distributions, because the exercise price of
all eligible warrants exceeds $3.90 per share and the warrant holders would
first have to pay the $9.00


exercise
price to Onvia in order to receive the $3.90 distribution.  The
maximum future distribution upon exercise of these warrants is approximately
$195,000.




Note 13:
            Supplemental
      Cash Flow Information




Onvia
paid approximately $20,000 and $16,000 in interest expense on capital leases
during the years ended December 31, 2008 and 2007,
respectively.  There was no cash paid for interest or income taxes in
the year ended December 31 2006.







Selected
Quarterly Financial Information (Unaudited)




The
following tables summarize the quarterly financial data for the years ended
December 31, 2008 and 2007:


Three
      Months EndedMarch
      31,
                                      
                                      
                                      June
      30,
                                      
                                      
                                      September
      30,
                                      
                                      
                                      December
      31,2008
                                      
                                      
                                      2008
                                      
                                      
                                      2008
                                      
                                      
                                      2008(in
      thousands, except per share amounts)Historical
      Consolidated Statements of Operations and Comprehensive Loss
      Data:Revenue
                                      
                                      $
                                      5,347
                                      
                                      
                                      $
                                      5,118
                                      
                                      
                                      $
                                      5,166
                                      
                                      
                                      $
                                      5,511Gross
      margin
                                      
                                      
                                      4,311
                                      
                                      
                                      
                                      3,993
                                      
                                      
                                      
                                      4,100
                                      
                                      
                                      
                                      4,412Noncash
      stock-based compensation
                                      
                                      
                                      216
                                      
                                      
                                      
                                      214
                                      
                                      
                                      
                                      130
                                      
                                      
                                      
                                      158Total
      operating expenses
                                      
                                      
                                      4,931
                                      
                                      
                                      
                                      5,381
                                      
                                      
                                      
                                      5,030
                                      
                                      
                                      
                                      5,281Loss
      from operations
                                      
                                      
                                      (620
                                      )
                                      
                                      
                                      (1,388
                                      )
                                      
                                      
                                      (930
                                      )
                                      
                                      
                                      (869
                                      )Net
      loss
                                      
                                      $
                                      (445
                                      )
                                      
                                      $
                                      (1,252
                                      )
                                      
                                      $
                                      (831
                                      )
                                      
                                      $
                                      (846
                                      )Comprehensive
      loss
                                      
                                      
                                      (445
                                      )
                                      
                                      
                                      (1,252
                                      )
                                      
                                      
                                      (831
                                      )
                                      
                                      
                                      (846
                                      )Basic
      net loss per common share
                                      
                                      $
                                      (0.05
                                      )
                                      
                                      $
                                      (0.15
                                      )
                                      
                                      $
                                      (0.10
                                      )
                                      
                                      $
                                      (0.11
                                      )Diluted
      net loss per common share
                                      
                                      $
                                      (0.05
                                      )
                                      
                                      $
                                      (0.15
                                      )
                                      
                                      $
                                      (0.10
                                      )
                                      
                                      $
                                      (0.11
                                      )Basic
      weighted average shares outstanding
                                      
                                      
                                      8,208
                                      
                                      
                                      
                                      8,230
                                      
                                      
                                      
                                      8,236
                                      
                                      
                                      
                                      8,243Diluted
      weighted average shares outstanding
                                      
                                      
                                      8,208
                                      
                                      
                                      
                                      8,230
                                      
                                      
                                      
                                      8,236
                                      
                                      
                                      
                                      8,243





Three
      Months EndedMarch
      31,
                                          
                                          
                                          June
      30,
                                          
                                          
                                          September
      30,
                                          
                                          
                                          December
      31,2007
                                          
                                          
                                          2007
                                          
                                          
                                          2007
                                          
                                          
                                          2007(in
      thousands, except per share amounts)Historical
      Consolidated Statements of Operations and Comprehensive Loss
      Data:Revenue
                                          
                                          $
                                          4,852
                                          
                                          
                                          $
                                          5,172
                                          
                                          
                                          $
                                          5,390
                                          
                                          
                                          $
                                          5,514Gross
      margin
                                          
                                          
                                          4,020
                                          
                                          
                                          
                                          4,233
                                          
                                          
                                          
                                          4,462
                                          
                                          
                                          
                                          4,482Noncash
      stock-based compensation
                                          
                                          
                                          227
                                          
                                          
                                          
                                          226
                                          
                                          
                                          
                                          219
                                          
                                          
                                          
                                          255Idle
      lease charges (1)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (2,653
                                          )
                                          
                                          
                                          -Total
      operating expenses
                                          
                                          
                                          5,273
                                          
                                          
                                          
                                          4,846
                                          
                                          
                                          
                                          1,852
                                          
                                          
                                          
                                          5,714(Loss)
      / income from operations
                                          
                                          
                                          (1,253
                                          )
                                          
                                          
                                          (613
                                          )
                                          
                                          
                                          2,610
                                          
                                          
                                          
                                          (1,232
                                          )Net
      (loss) / income
                                          
                                          $
                                          (1,011
                                          )
                                          
                                          $
                                          (358
                                          )
                                          
                                          $
                                          2,857
                                          
                                          
                                          $
                                          (994
                                          )Unrealized
      gain/(loss) on available-for-sale investments
                                          
                                          
                                          1
                                          
                                          
                                          
                                          (6
                                          )
                                          
                                          
                                          19
                                          
                                          
                                          
                                          (8
                                          )Comprehensive
      (loss) / income
                                          
                                          
                                          (1,010
                                          )
                                          
                                          
                                          (364
                                          )
                                          
                                          
                                          2,876
                                          
                                          
                                          
                                          (1,002
                                          )Basic
      net (loss) / income per common share
                                          
                                          $
                                          (0.13
                                          )
                                          
                                          $
                                          (0.04
                                          )
                                          
                                          $
                                          0.35
                                          
                                          
                                          $
                                          (0.12
                                          )Diluted
      net (loss) / income per common share
                                          
                                          $
                                          (0.13
                                          )
                                          
                                          $
                                          (0.04
                                          )
                                          
                                          $
                                          0.33
                                          
                                          
                                          $
                                          (0.12
                                          )Basic
      weighted average shares outstanding
                                          
                                          
                                          7,988
                                          
                                          
                                          
                                          8,038
                                          
                                          
                                          
                                          8,119
                                          
                                          
                                          
                                          8,199Diluted
      weighted average shares outstanding
                                          
                                          
                                          7,988
                                          
                                          
                                          
                                          8,038
                                          
                                          
                                          
                                          8,547
                                          
                                          
                                          
                                          8,199


(1)      Refer
to the discussion in Note 9 for additional information on idle lease
charge.







ITEM 9.                      CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE




None.





46





ITEM 9A(T).
            CONTROLS
      AND PROCEDURES




Disclosure
Controls and Procedures


The
Company maintains disclosure controls and procedures that are designed to ensure
that material information required to be disclosed in the Company’s periodic
reports filed or submitted under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, is recorded, processed, summarized and reported
within the time periods specified in the Securities Exchange Commission’s, or
SEC, rules and forms.  Onvia’s disclosure controls and procedures are
also designed to ensure that information required to be disclosed in the reports
the Company files or submits under the Exchange Act is accumulated and
communicated to the Company’s management, including its principal executive
officer and principal financial officer as appropriate, to allow timely
decisions regarding required disclosure.





Based on
management’s evaluation as of the end of the period covered by this Report, the
Company’s Chief Executive Officer and Chief Financial Officer have concluded
that the Company’s disclosure controls and procedures, as defined in Rule
13a-15(e) and 15d-15(e) promulgated under the Exchange Act, were effective as of
the end of the period covered by this Report.





Report
of Management on Internal Control over Financial Reporting


Onvia’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company, as such term is defined in
Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange
Act,.  Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  Internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the Company’s assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures are being made only
with proper authorizations; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company’s assets that could have a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





47


The
Company’s management, under the supervision of and with the participation of the
Chief Executive Officer and the Chief Financial Officer, assessed the
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2008 based on the framework and criteria established in Internal Control – Integrated
Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission, or COSO.  This evaluation included review of the
documentation of controls, evaluation of the design effectiveness of controls,
testing of the operating effectiveness of controls and a conclusion on this
evaluation.  Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was effective as of December
31, 2008.





This
Report does not include an attestation report of the Company’s registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this
Report.





Changes
in Internal Control over Financial Reporting


There
were no changes in the Company’s internal control over financial reporting
during the quarter ended December 31, 2008 that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.








ITEM 9B.                      OTHER
INFORMATION




None.




48


PART
III




Certain
information required by Part III is omitted from this Annual Report on Form 10-K
because Onvia intends to file a definitive Proxy Statement for its Annual
Meeting of Stockholders (the “Proxy Statement”) not later than 120 days after
the end of the fiscal year covered by this Form 10-K, and certain information to
be included therein is incorporated herein by reference.




ITEM 10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE




The
information required by this item regarding the Company’s directors is
incorporated herein by reference to the sections entitled “Proposal No. 1 –
Election of Directors” and “Section 16(a) Beneficial Ownership Reporting
Compliance” in the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 8, 2009. Information regarding the Company’s executive officers is
set forth in Item 4 of Part 1 of this Annual Report under the caption “Executive
Officers of the Registrant” and incorporated by reference into this Item
10.




The
Company adopted a code of ethics applicable to its Chief Executive Officer,
Chief Financial Officer, Controller and other finance leaders, which is a “code
of ethics” as defined by applicable rules of the Securities and Exchange
Commission. This code is publicly available on the Company’s website at
www.onvia.com. If the Company makes any amendments to this code other than
technical, administrative or other non-substantive amendments, or grants any
waivers, including implicit waivers, from a provision of this code to the
Company’s Chief Executive Officer, Chief Accounting Officer or Controller, the
Company will disclose the nature of the amendment or waiver, its effective date
and to whom it applies on its website or in a report on Form 8-K filed with the
Securities and Exchange Commission.




ITEM 11.
            EXECUTIVE
      COMPENSATION




The
information required by this item is incorporated by reference to the sections
entitled “Compensation of Executive Officers,” “Compensation Committee
Interlocks and Insider Participation” and “Compensation Committee Report” in the
Proxy Statement.




ITEM 12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS




The
information required by this item is incorporated by reference to the sections
entitled “Equity Compensation Plan Information” and “Common Stock Ownership of
Certain Beneficial Owners and Management” in the Proxy Statement.




ITEM 13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE




The
information required by this item is incorporated by reference to the sections
entitled “Certain Relationships and Related Transactions” and “Determination of
Director Independence” in the Proxy Statement.




ITEM 14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES




The
information required by this item is incorporated by reference to the sections
entitled “Independent Registered Public Accounting Firm and Fees” in the Proxy
Statement.




49


PART
IV




ITEM 15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES




Index
to Consolidated Financial Statements and Financial Statement
Schedule:




1.
            INDEX
      TO CONSOLIDATED FINANCIAL
STATEMENTS


PageReport
      of Deloitte & Touche LLP, Independent Registered Public
      Accounting Firm
                          30Consolidated
      Financial Statements:Balance
      Sheets
                          31Statements
      of Operations and Comprehensive (Loss) / Income
                          32Statements
      of Cash Flows
                          33Statements
      of Stockholders’ Equity
                          34Notes
      to Consolidated Financial Statements
                          35




2.
            FINANCIAL
      STATEMENT SCHEDULES





SCHEDULE
II – VALUATION AND QUALIFYING ACCOUNTS





Description
                          
                          Balances at
      Beginning of Period
                          
                          
                          Charged to
      Costs and Expenses
                          
                          
                          Deductions(1)
                          
                          
                          Balances at
      End of PeriodAllowance
      for doubtful accountsYear
      Ended December 31, 2006
                          
                          $
                          44,397
                          
                          
                          $
                          42,505
                          
                          
                          $
                          (38,745
                          )
                          
                          $
                          48,157Year
      Ended December 31, 2007
                          
                          
                          48,157
                          
                          
                          
                          38,501
                          
                          
                          
                          (34,515
                          )
                          
                          
                          52,143Year
      Ended December 31, 2008
                          
                          $
                          52,143
                          
                          
                          $
                          74,962
                          
                          
                          $
                          (95,145
                          )
                          
                          $
                          31,960(1)
      Uncollectible accounts written off, net of recoveries.





Schedules not
listed above have been omitted because they are not applicable, are not required
or the information required to be set forth in the schedules is included in the
consolidated financial statements or related notes.


50


3.               EXHIBITS





Certain
of the agreements filed as exhibits to this Form 10-K contain representations
and warranties by the parties to the agreements that have been made solely for
the benefit of the parties to the agreement. These representations and
warranties:





·
            May
      have been qualified by disclosure that were made to the other parties in
      connection with the negotiation of the agreements, which disclosures are
      not necessarily reflected in the
agreements;


·
            May
      apply standards of materiality that differ from those of a reasonable
      investor; and


·
            Were
      made only as of specified dates contained in the agreements and are
      subject to later developments. Accordingly, these representations and warranties may not describe the actual
state of affairs as of the date they were made or at any other time, and
investors should not rely on them as statements of fact.


Number
                Description3.1
                Amended
      and Restated Certificate of Incorporation (incorporated by reference to
      Exhibit 3(i).1 to the Form 10-Q for the quarter ended June 30, 2004, filed
      on August 12, 2004)3.2
                Bylaws
      of Onvia (incorporated by reference to Exhibit 3.2 to the Form 10-K for
      the year ended December 31, 2000, filed on  April 2,
      2001)4.1
                Form
      of Onvia’s Common Stock Certificate (incorporated by reference to the
      Registration Statement on Form S-1 dated December 21, 1999, as amended
      (File No. 333-93273))4.2
                Form
      of Rights Agreement between the Company and U.S. Stock Transfer Corp. as a
      Rights Agent (including as Exhibit A the form of Certificate of
      Designation, Preferences and Rights of the Terms of the Series RP
      Preferred Stock, as Exhibit B the form of the Right Certificate, and as
      Exhibit C the Summary of Terms of Rights Agreement) (incorporated by
      reference to Exhibit 4.1 from the Form 8-K, filed on November 25,
      2002)10.1*
                Onvia,
      Inc. 2008 Equity Incentive Plan (incorporated by Reference to the 2008
      Proxy Statement dated August 6, 2008)10.2*
                Amended
      Onvia, Inc. Savings and Retirement Plan (incorporated by reference to
      Exhibit 10.1 from the Form 10-K for the year ended December 31, 2004,
      filed on March 25, 2005)10.3*
                Form
      of Indemnification Agreement between Onvia and each of its officers and
      directors (incorporated by reference to the Registration Statement on Form
      S-1 dated December 21, 1999, as amended (File No.
    333-93273))10.4*
                Amended
      2000 Employee Stock Purchase Plan (incorporated by Reference to Exhibit
      10.4 to the Report on Form 10-Q for the quarter ended September 30, 2008,
      filed on November 14, 2008)10.5*
                2000
      Directors’ Stock Option Plan (incorporated by reference to the
      Registration Statement on Form S-1 dated December 21, 1999, as amended
      (File No. 333-93273))10.6*
                Third
      Amendment to Employment and Noncompetition Agreement with Michael D.
      Pickett dated September 27, 2002 (incorporated by reference to Exhibit
      10.2 to the Report on Form 10-Q for the quarter ended September 30, 2002,
      filed on November 6, 2002)10.7*
                Employment
      Agreement with Irvine N. Alpert dated February 22, 2002 and Commission and
      Bonus Plan with Irvine N. Alpert dated September 11, 2001
      (incorporated by reference to Exhibit 10.4 to the Report on Form 10-K
      for the year ended December 31, 2001, filed on March 29,
    2002)10.8*
                Medical
      Dental Building Lease Agreement between Onvia and GRE 509 Olive LLC, dated
      July 31, 2007 (incorporated by reference to Exhibit 10.12 to the Report on
      Form 10-Q for the period ended September 30, 2007, filed on November 14,
      2007)10.9*
                2008
      Management Incentive Plan (incorporated by reference to Exhibit 10.9 from
      the Form 10-Q for the quarter ended March 31, 2008, filed on May 13,
      2008)10.10*++
                2009
      Management Incentive Plan10.11*++
                2009
      Executive Compensation Plan for Irvine Alpert, Executive Vice
      President10.12*++
                2009
      Executive Compensation Plan for Michael Tannourji, Senior Vice President
      Sales and Marketing23.1++
                Consent
      of Deloitte & Touche LLP31.1++
                Certification
      of Michael D. Pickett, Chairman of the Board, Chief Executive Officer and
      President of Onvia, Inc., Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.2++
                Certification
      of Cameron S. Way, Chief Financial Officer of Onvia, Inc., Pursuant to
      Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1++
                Certification
      of Michael D. Pickett, Chairman of the Board, Chief Executive Officer and
      President of Onvia, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2++
                Certification
      of Cameron S. Way, Chief Financial Officer of Onvia, Inc., Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002


*           Executive
Compensation Plan or Agreement


++           Filed
Herewith


51


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, on March 31, 2009.




ONVIA,
      INC.By:
            /s/
      Michael D. PickettMichael
      D. PickettChairman
      of the Board, Chief Executive Officer and PresidentBy:
            /s/
      Cameron S. WayCameron
      S. WayChief
      Financial Officer





POWER
OF ATTORNEY





KNOW ALL
MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer
of Onvia, Inc., a Delaware corporation (the “Company”), hereby constitutes and
appoints Michael D. Pickett and Cameron S. Way, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
re-substitution, for him and in his name, place and stead in any and all
capacities, to sign one or more Annual Reports for the Company’s fiscal year
ended December 31, 2008, on Form 10-K under the Securities Exchange Act of 1934,
as amended, any amendments thereto, and all additional amendments thereto, each
in such form as they or any one of them may approve, and to file the same with
all exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done so that such Annual
Report shall comply with the Securities Exchange Act of 1934, as amended, and
the applicable Rules and Regulations adopted or issued pursuant thereto, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their substitute or re-substitute, may lawfully do or cause to be done
by virtue hereof.




Pursuant
to the requirements of the Securities Act of 1934, this Report has been signed
below by the following persons, on behalf of the Registrant and in the
capacities and on the dates indicated.




Signature
                Title
                Date/S/    MICHAEL D. PICKETT
                  Michael
      D. Pickett
                Chairman
      of the Board, Chief Executive Officer and President
                March
      31, 2009/S/    CAMERON S. WAY
                  Cameron
      S. Way
                Chief
      Financial Officer
                March
      31, 2009/S/    JEFFREY C. BALLOWE
                  Jeffrey
      C. Ballowe
                Director
                March
      31, 2009/S/    JAMES L. BRILL
                  James
      L. Brill
                Director
                March
      31, 2009/S/    ROBERT G. BROWN
                  Robert
      G. Brown
                Director
                March
      31, 2009/S/    ROGER L. FELDMAN
                  Roger
      L. Feldman
                Director
                March
      31, 2009/S/    D.
      VAN SKILLING
                  D.
      Van Skilling
                Director
                March
      31, 2009/S/    STEVEN D. SMITH
                  Steven
      D. Smith
                Director
                March
      31, 2009


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