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, 2007


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 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.   ̈




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  x
    Smaller reporting company   ̈




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, 2007,
as reported on the NASDAQ Global Market, was $51,612,591.




The
number of shares of the registrant’s common stock outstanding at March 1, 2008
was 8,218,780.












ONVIA,
INC.




FORM
10-K


For
the Year Ended December 31, 2007




INDEX





PagePART
      I.
              1ITEM
      1. BUSINESS
              1ITEM
      1A.  RISK FACTORS
              8ITEM
      1B. UNRESOLVED STAFF COMMENTS
              14ITEM
      2. PROPERTIES
              14ITEM
      3. LEGAL PROCEEDINGS
              14ITEMS
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              15PART
      II.
              16ITEM
      5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
      AND ISSUER PURCHASES OF EQUITY SECURITIES
              16ITEM
      6. SELECTED CONSOLIDATED FINANCIAL DATA
              18ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
              19ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              30ITEM
      8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
              32CONSOLIDATED
      BALANCE SHEETS
              32CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)
              33CONSOLIDATED
      STATEMENTS OF CASH FLOWS
              34CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              35NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
              36ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
              50ITEM
      9A(T). CONTROLS AND PROCEDURES
              50ITEM
      9B. OTHER INFORMATION
              51PART
      III.
              52ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
              52ITEM
      11. EXECUTIVE COMPENSATION
              54ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
              66ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              69ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
              69PART
      IV.
              71ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
              71SIGNATURES
              73















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. We undertake 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 we file from time to time with
the Securities and Exchange Commission.




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




Onvia is
a leading provider of business solutions that help companies plan, market and
sell to targeted markets throughout the United States, or U.S.  We
have developed a unique process for collecting and organizing transactional
information, which we convert into actionable market intelligence.  We
believe our business solutions provide our clients with a distinct competitive
advantage.





Many
companies react to business opportunities instead of proactively and
intelligently pursuing the best prospects for their products and
services.  Onvia’s business solutions help clients more effectively
target federal, state, local and educational purchasing entities, and as of
February 2008, our solutions include in-depth analysis on early stage commercial
and residential infrastructure projects.  Our business solutions allow
clients to track their competitors, analyze market trends, and identify new
market opportunities to stay ahead of market changes.  Our clients can
leverage our historical database to identify prospects, establish alerts for
upcoming contracting opportunities, review history on public and private
infrastructure projects, and research government agencies and private sector
businesses to effectively establish and maintain lucrative business
relationships.





Onvia’s
proprietary database, Onvia Dominion®, 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 4.6 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 63,000 current and historical opportunities covering activity
within the top 76 US 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.





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.  Advances in technology, broad use of the Internet by government
agencies, and the diligent work of the Company’s research team to collect and
classify this information have enabled Onvia to make the same high-value sales
intelligence affordable to businesses of all sizes.


1





Our
revenues are currently generated from two main business channels: client
subscriptions and content licenses.  Contracts for our
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 Onvia’s business
intelligence data to their customers.  Content license contracts are
generally multi-year arrangements that are invoiced on a monthly or quarterly
basis, and these agreements generally have a higher annual contract value than
the Company’s subscription-based services.  Revenue from content
license agreements is recognized ratably over the term of the
agreement.  Onvia also generates revenue from fees charged for
document download services, list rental services, and other market intelligence
reports, and these fees are recognized upon delivery.





Onvia was
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 on new projects and in support of new and existing
facilities.  Over 3.4 million businesses compete for opportunities
within this highly competitive marketplace and identifying qualified business
partners and prospects is essential to a company’s
success.  Identifying relevant infrastructure projects and partners
can be difficult and companies spend a substantial amount of time and effort to
locate and research new 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 about the project 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 historical projects.





Success
in the private commercial and residential construction marketplace is largely
based upon strong business relationships and corporate
positioning.  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 for companies to identify private sector projects
at the very earliest stage.  Companies competing in this market need
to understand who the key decision makers are within their segment and
geographic footprint 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 behind the request for proposal, or RFP, and request for
quote, or RFQ, documents.  Without tools to quickly identify the
pertinent information, businesses must read the entire documents to determine if
there are opportunities relevant to their business.  Onvia’s
comprehensive database contains much of this information on both a historical
and real-time basis and thousands of records are 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.  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 Onvia’s database and tools, our clients spend less time
on research and more time preparing winning proposals, establishing
relationships, and executing contracts.





Products
and Services




Our
products and services provide access to our proprietary Dominion® database of
project specific information and provide clients specialized tools for analyzing
information relevant to their business.  We expect to continue to
expand our content and develop new database analysis and access tools to meet
the needs of our 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 our 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


·
            Business
      Consulting Services


·
            Operations
      and Maintenance Services


·
            Transportation
      Equipment




Within
these verticals we also provide hard to find content, which creates 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 valuable information for use in their own sales and marketing
      activities; and


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





Our suite
of information services is comprised of the following products:




Onvia’s
Business Solutions




Onvia’s
public and private sector solutions are two distinct service offerings, but when
used together, the combined information provides a comprehensive view of the
infrastructure marketplace.





We have
three distinct access levels to our public sector information: Onvia Business
Builder; Onvia Navigator; and the Onvia Guide.





Onvia
Business Builder


Onvia
Business Builder is our most comprehensive public sector product and is intended
to enable businesses of all sizes to compete more effectively in the government
procurement marketplace.  This product leverages Onvia’s 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 focused on the verticals described above, and
associated around four key data hubs; project history, agency research, agency
buyer research, and competitor research.   The association of
each record makes it possible to evaluate purchasing trends by agency and by
agency buyer and identify or evaluate potential competitors.





Project
History


3


Project
History tracks and provides information through a project’s life cycle,
including advance notice information, planholder/bidder lists and bid results.
This information offers 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 clients with a more comprehensive view of their potential
client, 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 work 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 our clients.





Onvia
Navigator


Onvia
Navigator is our database research tool, which allows clients to easily identify
market opportunities within our proprietary database and search the contents of
the related specification documents. Onvia Navigator enables users to focus
their research in many ways, including by procurement types, submittal dates,
contract locations, agencies, and contract values. Once the desired results are
identified using Onvia Navigator, clients can employ Onvia Business Builder to
provide detailed information on the search results.





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.





In
February 2008, Onvia expanded its business solutions to include information on
the commercial and residential development market.




Onvia
Planning and Construction


Onvia
Planning and Construction provides early stage project information on commercial
and residential development projects.  This market intelligence
solution is comprehensive, covering the top 76 metropolitan areas within the
U.S.  Our database of over 63,000 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, Onvia Planning and Construction 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
Information Reports


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





·
            Term Contracts – The
      Term Contract report contains 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 them to
perform


4


an
      early evaluation of the opportunity so they can be more competitive with
      their proposals to increase their public sector
  business.


·
            Contact Lists– Provide
      our 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 – The vital market intelligence needed for strategic
      planning and marketing, such as:


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


·
            Market
      growth rates to assist in business
planning;


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


·
            Competitive
      analysis; and


·
            Seasonality
      and buying trends.


·
            Winning Proposals
      Library – Compare and contrast winning proposals submitted by
      competing firms in order to gain valuable 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.





Strategy




Onvia’s
mission is to become the competitive advantage that powers businesses through
innovative market intelligence.  Our strategic plan calls for
differentiating the Company within the infrastructure marketplace with the
long-term objective of consistent revenue growth and increasing return on
investment.  Key elements of our strategy include:





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


·
            Enhance
      our existing research tools: Since
      2005, we have leveraged our flagship product, Onvia Business Builder,
      which provides access to historical information in addition to the real
      time notification that we already provided.  In 2006, we
      launched Onvia Navigator, which allows clients to easily identify market
      opportunities within our proprietary database and search the contents of
      the related specification documents. In January 2008, we launched Onvia
      Planning and Construction, which provides valuable early stage information
      on commercial and residential development projects.  By
      continuing to enhance our product offering through the introduction of new
      tools and services that further improve our clients’ ability to tailor the
      information to the needs of their business, we expect that we will
      increase the satisfaction of our existing clients, thereby increasing
      retention rates, and also will 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. 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 in February 2008.  We expect
      to continue to introduce new content and tools to enhance the appeal of
      our products to existing and potential clients in 2008 and
      beyond.


·
            Increase
      annual contract value:  Annual contract value represents
      the aggregate annual subscription value of our client
      base.  Growth in annual contract value demonstrates success in
      increasing the number of clients and upgrading existing clients into new
      and higher valued products.  We intend to increase annual
      contract value by upgrading existing clients to higher value products,
      increasing prices and introducing new products during
  2008.


·
            Drive
      adoption of our higher value products: Clients that purchase our
      higher value products such as Onvia Business Builder and Onvia Planning
      and Construction, generally receive the most comprehensive
      information


5


specific
      to their businesses. These higher value products have also historically
      produced higher client retention rates. We seek to better serve our
      non-premium clients by migrating them to higher value
      products.






Clients




We serve
two separate business channels for our business clients:  client
subscriptions and content licenses.  Client subscriptions are sold
directly to the end user of the business intelligence.  At December
31, 2007, Onvia had approximately 8,500 subscribing clients.  Client
subscriptions contributed approximately 85% of the Company’s revenue in 2007,
compared to 86% in 2006.  At December 31, 2007, the annual contract
value of our client subscribers was approximately $17.6 million, compared to
$15.5 million at December 31, 2006.





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





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




Sales
Strategy




The
primary objective of our sales strategy is to increase annual contract value and
client retention.  The Company’s sales strategy is based on
organizational design, increased efficiencies and establishing a predictable
model of new client acquisition:


·
            Increase
      the specialization of our account management resources 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 our acquisition team by shortening
      the prospect discovery process through consistent and proactive
      prequalification of prospects and selective targeting of ideal prospects
      that do business in verticals served well within our product
      offering.





Our 2008
sales strategy also has strong emphasis on performance management processes
around forecasting, managing activities and results, and prioritizing activity
around at risk clients.




Marketing
Strategy




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





In 2007,
we focused our marketing efforts on generating high quality sales leads at the
lowest cost, while providing the proper 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 2008 our lead generation efforts will focus on
increasing efficiency through driving more highly qualified, targeted leads and
will supplement this effort with more sophisticated client relationship
management, relationship marketing communications, analytics, tracking and
reporting.





Agency
Relationships




Agency
partners bring value through source contributed content and by providing
referrals of their business suppliers. As of December 31, 2007, Onvia 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. Some
recent partner additions include Atlanta Public Schools and Wisconsin
Association of Public Purchasers.


6


Technology




We
support our operations and online 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.




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.




Onvia’s
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. The Company’s co-location vendor provides 24x7
monitoring and engineering support in a climate-controlled and physically secure
environment and Onvia’s network operations personnel have 24x7 access to the
facility. Onvia’s data center has redundant communication lines from multiple
Internet service providers and has its own emergency power and backup systems.
The Company houses all non-critical systems such as development servers, quality
assurance servers, and internal network servers at its headquarters in
Seattle.




In
addition to maintaining responsibility for the technical architecture, security
and uptime of its online solutions, the Company’s 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 around the infrastructure marketplace is
underserved. Competitors include, to a limited extent, bid aggregators, industry
analysts and government e-procurement platforms.





Onvia’s
current and potential competitors include, but are not limited to, the
following:





•
            Information
      companies who target specific verticals also covered by Onvia’s services,
      such as McGraw-Hill, Contractors Register and Input;
  and


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





Onvia may
face additional competition in the future as well-funded companies look to
develop new government procurement and private sector database products and
services. Onvia must differentiate itself by increasing the value of its
database, developing products and services with high switching costs, and by
creating a loyal, recurring base of clients.  To achieve this Onvia
must continually enhance its content and sources, and provide its clients with
relevant, customized views of its database.





The
Company believes that the principal competitive factors affecting its market
include, but are not limited to, breadth and depth 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 target clients, offer greater value in our content and services and sustain
a more efficient operating model. We also mitigate some potential competitive
pressures by selling our content to some of our competitors for redistribution
to their clients. We believes that our current database offering compares
favorably to select offerings available in the marketplace today based on the
depth and history of its information, breadth of content types, and daily
updates.




Seasonality




The new
client acquisition side of our business is subject to some seasonal
fluctuations. The third quarter is generally the Company’s slowest quarter for
new client acquisition. The construction industry is our single largest market
and these prospects are typically engaged on projects during the summer months,
not prospecting for new work, which causes new


7


client
acquisition to decline compared to the other quarters in the year. 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 our 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 with respect to
our e-marketplace 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 our 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.




We
presently have no issued U.S. patents and have one U.S. patent application
pending.  We filed a U.S. patent application for our 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 have
registered trademarks in the U.S. for Onvia, Onvia and the design (current logo
with the orange circular design), Onvia Dominion®, DemandStar, QuoteWire,
BidWire, and e-Journal of Commerce. We also have registered trademarks in Canada
for Onvia (previous logo), the Onvia checkmark logo, and Onvia.com.




Employees




As of
March 1, 2008, we had 172 employees working in the following departments: 84 in
sales and marketing, 50 in research, which are included in cost of sales, 26 in
technology and development and 12 in general and administrative.




None of
our employees is 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, 2007, 2006 and 2005, all of our revenues were
generated from clients located in the U.S.  All of our long lived
assets are located in the U.S.  A portion of our net operating losses,
or NOLs, are denominated in Canadian dollars; however, a full valuation
allowance has been recorded for the net deferred tax asset associated with these
NOLs, because realization of the future tax benefit is not currently more likely
than not.




ITEM 1A.
            RISK
      FACTORS




In
addition to other information in this Report, the following risk factors should
be carefully considered in evaluating Onvia and its 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




We
may not be able to meet our 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 our clients’ satisfaction with our products and services and will impact
their decision to renew. If we are unable to meet our clients’ expectations, our
renewal rates and our projected growth and profitability will
suffer.




8


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





During
2007, we directed significant resources toward the development of a new website,
which we believe will generate a significant portion of our sales leads in the
future.  If this new website or other existing or planned marketing
initiatives do not drive sufficient sales leads to our sales organization, 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 our 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 increasing headcount on our acquisition sales team in 2008
and by improving the productivity of each of our sales
representatives.  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 our operating
expenses and may adversely impact our operating results.





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




We expect
that a significant portion of our future growth will come from increasing our
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 the Company. Failure to increase subscribership to
these products would adversely impact our client metrics and future
growth.




We
may not achieve our projections for adoption of our products by targeted
enterprise clients.




We
anticipate that a significant portion of our future revenue will be generated
from sales to larger businesses. Our enterprise sales team targets larger
companies that will purchase multiple licenses for our database products, for
redistribution of our data to their employees or clients, or for remarketing
their own products. If we fail to achieve our targeted adoption rates by
enterprise clients, our operating results would be harmed.




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





We made
significant investments in 2007 to expand our database and develop the Onvia
Planning and Construction product and we plan to launch additional content and
tools in 2008 and beyond.  We expect to see an increase in retention
rates for our 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 and would impact our client metrics and future
growth.





Weakness
in the commercial-residential housing market 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 would be 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, and the majority
of our clients are small to medium sized businesses.  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.




Weakness
in the commercial-residential housing market or in the U.S. economy in general,
could reduce tax revenues collected by government agencies and may result in
reduced government spending in the future.




Government
agencies generate revenue from property, income and other
taxes.  Weakness in the housing market may cause property values to
decline, which would result in lower property taxes. In addition, weakness in
the overall U.S. economy may result in decreases in personal and business income
taxes generated by government agencies.  A reduction in government tax
revenues may result in decreased spending by government agencies.  If
government agencies significantly reduce spending on new projects, new content
for our products and services may decline, and our clients and prospective
clients may decrease spending on marketing to government agencies.  In
either case, new client acquisition and retention rates may
decline.








In order
to achieve our 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 our current sales associates and attract and hire new sales associates
with the appropriate skills, we may not be able to achieve our projected sales
targets and revenue growth rates.




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




If we
find that our retention and acquisition rates in any of our focused verticals
are not meeting our expectations due to lack of bid-flow or for other reasons,
we may choose to target fewer industry verticals to improve client satisfaction
and


9


retention
in core verticals, and we may lose clients in our other non-core verticals.
Focusing 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 our competitors may introduce products with similar
functionality.  If our 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
our functionality or increase our marketing efforts to offset challenges from
our competitors, we may lose market share.





Risks
related to our new product strategy





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




We expect
to introduce new content in 2008 that will complement our current suite of
products.  If client acceptance and adoption of these new products is
below our expectations, our projected growth rates and client acquisition and
retention goals may not be achieved, and our 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 their
anticipated launch dates, our 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 our new
product development plan.  If we are unable to find new ways to
collect content efficiently, and aggregate new content types in a cost effective
manner, our gross margins may decrease.




We
have invested significant capital into the development of new products, such as
Onvia Planning and Construction and Term Contract Reports, and if new products
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 portion of our revenue from this product in the
future.  We expect to launch additional new products in 2008 and
expect to see continued increases in adoption of Onvia Business Builder and
Onvia Navigator throughout 2008 and beyond.  If adoption of these and
other new product introductions is not consistent with our expectations, we will
not see the expected return on these investments.





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





We plan
to implement price increases with respect to some of our existing products in
2008.  We have developed pricing strategies for our Onvia Planning and
Construction product, and we will also be required to develop new pricing
strategies for planned new product launches, and packaged pricing strategies for
our existing products in 2008.  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, 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 us an annual fee for this information and that we will see
increases in the annual value of these contracts in the near-term and in the
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
have a limited operating history, making it difficult to evaluate our business
and future prospects.




Onvia has
been serving businesses since March 1997 and has been focusing on including
government agencies in our network since April 2001. We have a limited operating
history upon which an investor may evaluate our business and prospects. Our
potential for future profitability must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
early stages of development, particularly companies in new and rapidly evolving
markets, such as e-marketplaces. We may not successfully address any of these
risks.




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




2007
represented the first year in Onvia’s history that we generated positive cash
flow from operations.  Due to seasonal fluctuations in our business,
we did not generate positive cash flow from operations in the third quarter of
2007, but we did generate positive cash flow in the other quarters in the year
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
continue 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 our 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 our target business clients and government
agencies. We expect our revenue and operating results to continue to vary
significantly from quarter to quarter, making it difficult to formulate
meaningful comparisons of our 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
have 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, Onvia’s state of incorporation, can have the effect of making it
difficult for a third-party to acquire Onvia, even if doing so would be
beneficial to our stockholders. These provisions include:




•
            the
      classification of Onvia’s 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 Onvia.








Operational
risks




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


11


application
servers totally unavailable, slowed their response time or prevented us from
making our service available to our 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 have deployed our primary business application servers to a
secure offsite facility with backup utility power and redundant Internet
connectivity. 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 product 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.




Clients
and visitors to our web site depend on their own Internet service providers,
online service providers and other web site operators for access to our web
sites. These providers have experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to Onvia’s systems.




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 our Onvia Dominion® database and future product offerings have and
will place significant additional demands on our 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 our database.  If
new content types or product introductions change current network and database
requirements or if growth in our 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 our
senior management, directors and key employees. The loss and inability to
replace any of these employees or directors would likely harm our
business.




We
may be required to continue to leverage third-party recruiting firms to a
greater extent than anticipated to assist in hiring key employees.





The
employment market in Seattle is extremely competitive.  If we are
unable to internally recruit candidates to fill key open positions, we may be
required to use outside recruiting firms to assist in hiring, which would
increase our operating expenses and would adversely impact our results of
operations.





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




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 our
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 our
proprietary information without our 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.


12




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 require 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 Onvia 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.




Regulatory,
judicial or legislative risks




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




Onvia is
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 our 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 Onvia. 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.




As
e-commerce evolves, federal, state, local and foreign agencies could adopt
regulations covering issues such as privacy, content and taxation of services
and products. If enacted, government regulations could limit the market for our
services and offerings. Although many regulations might not apply to our
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 its 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 we 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 our clients. The loss or the unavailability of our data
sources in the future, or the loss of our 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.


13




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 generating 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 our operating results and
cash flows.




Available
Information




Onvia
files with and furnishes 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. Onvia’s 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 the
Company files 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. Onvia’s 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 file them with, or furnish them to, the
SEC.







ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS





None.








ITEM 2.
            PROPERTIES




Onvia’s
headquarters are located in Seattle, Washington.  During all of 2007
the Company leased 29,785 square feet in two floors of a four-story office
complex in its former corporate headquarters building.  In July 2007,
Onvia entered into a lease agreement with GRE 509 Olive LLC, under which Onvia
leases approximately 35,000 square feet in two floors of a sixteen-story
office complex located at 509 Olive Way, Seattle, Washington.  The
relocation of our corporate headquarters to this new building occurred on
January 7, 2008.  The Company believes 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, Onvia entered into a termination agreement with Blume Yale
Limited Partnership to terminate the lease on its 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, Onvia has no further obligation on that space.







ITEM 3.
            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


14


filed by
the plaintiffs, but noted that the plaintiffs could ask the district court to
certify more narrow classes than those that were
rejected.   Prior to the Second Circuit’s December 5, 2006
ruling, the majority of issuers, including Onvia, and their insurers had
submitted a settlement agreement to the district court for
approval.  In light of the Second Circuit opinion, the parties agreed
that the settlement could not be approved.  On June 25, 2007, the
district court approved a stipulation filed by the plaintiffs and the issuers
which terminated the proposed settlement.  On August 14, 2007, the
plaintiffs filed amended complaints in the six focus cases. The amended
complaints include a number of changes, such as changes to the definition of the
purported class of investors and the elimination of the individual defendants as
defendants. On September 27, 2007, the plaintiffs filed a motion for class
certification 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 November 14, 2007.  On December
21, 2007, the issuers and the underwriters filed papers opposing plaintiffs’
class certification motion and plaintiffs filed an opposition to defendants’
motions to dismiss.  On January 28, 2008, the issuers and the
underwriters filed reply briefs in further support of their motions to dismiss
the amended complaints.





Due to
the inherent uncertainties of litigation, the Company cannot accurately predict
the ultimate outcome of this matter.  Onvia cannot predict whether it
will be able to renegotiate a settlement that complies with the Second Circuit’s
mandate, nor can the Company predict the amount of such settlement or whether
that amount would be greater than Onvia’s insurance coverage.  If
Onvia is found liable, the Company is 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 its 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 has waived
service and is in the process of considering what, if any, action to take in
response to this litigation.   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





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, 2007.




15


PART
II




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




Market
Information




Onvia
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 Onvia’s 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, 2006First
      Quarter
              
              $
              6.42
              
              
              $
              4.10Second
      Quarter
              
              
              5.93
              
              
              
              4.85Third
      Quarter
              
              
              5.35
              
              
              
              4.93Fourth
      Quarter
              
              
              6.19
              
              
              
              5.02Year
      ended December 31, 2007First
      Quarter
              
              $
              7.08
              
              
              $
              5.90Second
      Quarter
              
              
              8.57
              
              
              
              6.85Third
      Quarter
              
              
              9.05
              
              
              
              7.85Fourth
      Quarter
              
              
              8.78
              
              
              
              7.83
  Holders




As of
March 1, 2008, there were approximately 505 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 warrants issued in 1999 for subordinated debt, which was
paid off in 2002.  The compensation plans consist of the 1999 Stock
Option Plan, or 1999 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
1999 Plan, the Directors’ Plan, the ESPP, and the warrants as of December 31,
2007.




Plan
      category
              
              Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
              
              
              Weighted
      average exercise price of outstanding options, warrants and
      rights
              
              
              Number
      of securities remaining available for future issuanceEquity
      compensation plans approved by security holdersAmended
      and Restated 1999 Stock Option Plan
              
              
              1,799,563
              
              
              $
              7.30
              
              
              
              264,4252000
      Directors' Stock Option Plan
              
              
              48,000
              
              
              
              55.38
              
              
              
              6,000Employee
      Stock Purchase Plan
              
              
              -
              
              
              
              N/A
              
              
              
              386,298Warrants
      issued for debt financing
              
              
              49,941
              
              
              
              9.00
              
              
              
              -Total
              
              
              1,897,504
              
              
              $
              8.56
              
              
              
              656,723
  Dividends




No cash
dividends were declared for the years ended December 31, 2007 and 2006, nor does
the Company have the intention to pay cash dividends in the foreseeable
future.





Recent
Sales of Unregistered Securities




None.


16





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 ending December 31, 2007 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, 2002 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.








17


ITEM 6.                      SELECTED
CONSOLIDATED FINANCIAL DATA




The
following selected consolidated financial data for the fiscal years ended
December 31 for the years presented should be read in conjunction with the
consolidated financial statements and related notes of Onvia and its
subsidiaries 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 31,2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003(in
      thousands, except per share data)Consolidated
      Statements of Operations Data:Revenue
              
              $
              20,928
              
              
              $
              16,739
              
              
              $
              14,714
              
              
              $
              13,076
              
              
              $
              9,991Gross
      margin
              
              
              17,197
              
              
              
              13,344
              
              
              
              11,433
              
              
              
              11,434
              
              
              
              8,815Noncash
      stock-based compensation (1)
              
              
              927
              
              
              
              1,258
              
              
              
              84
              
              
              
              10
              
              
              
              408Idle
      lease accrual and restructuring charges (2)
              
              
              (2,653
              )
              
              
              (67
              )
              
              
              1,228
              
              
              
              916
              
              
              
              2,021Total
      operating expenses
              
              
              17,685
              
              
              
              19,840
              
              
              
              19,095
              
              
              
              15,827
              
              
              
              17,408Loss
      from operations
              
              
              (488
              )
              
              
              (6,496
              )
              
              
              (7,662
              )
              
              
              (4,393
              )
              
              
              (8,593
              )Net
      income / (loss)
              
              $
              494
              
              
              $
              (5,544
              )
              
              $
              (6,920
              )
              
              $
              (3,900
              )
              
              $
              (7,913
              )Unrealized
      gain (loss) on available-for-sale securities
              
              
              6
              
              
              
              17
              
              
              
              8
              
              
              
              (31
              )
              
              
              -Comprehensive
      income / (loss)
              
              $
              500
              
              
              $
              (5,527
              )
              
              $
              (6,912
              )
              
              $
              (3,931
              )
              
              $
              (7,913
              )Basic
      net income / (loss) per common share
              
              $
              0.06
              
              
              $
              (0.70
              )
              
              $
              (0.89
              )
              
              $
              (0.51
              )
              
              $
              (1.03
              )Diluted
      net income / (loss) per common share
              
              $
              0.06
              
              
              $
              (0.70
              )
              
              $
              (0.89
              )
              
              $
              (0.51
              )
              
              $
              (1.03
              )Basic
      weighted average shares outstanding
              
              
              8,087
              
              
              
              7,888
              
              
              
              7,814
              
              
              
              7,720
              
              
              
              7,678Diluted
      weighted average shares outstanding
              
              
              8,606
              
              
              
              7,888
              
              
              
              7,814
              
              
              
              7,720
              
              
              
              7,678





(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 2006 represents the
      difference between Onvia’s original sublease estimates and the actual
      negotiated terms included in the lease amendment negotiated in September
      2006.  The net annual reduction 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.  Refer to the
      discussion under Item 2 above or under Note 11 to the Consolidated
      Financial Statements for further information on this lease
      termination.


As of December 31,2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003(in
      thousands)Consolidated
      Balance Sheet Data:Cash,
      cash equivalents and short-term investments
              
              $
              14,301
              
              
              $
              14,435
              
              
              $
              20,540
              
              
              $
              27,944
              
              
              $
              30,382Long-term
      investments, net of currrent portion
              
              
              -
              
              
              
              1,478
              
              
              
              -
              
              
              
              -
              
              
              
              2,001Total
      assets
              
              
              25,741
              
              
              
              23,991
              
              
              
              28,635
              
              
              
              36,030
              
              
              
              39,866Idle
      lease and restructuring accrual, current and long term (1)
              
              
              -
              
              
              
              3,779
              
              
              
              6,538
              
              
              
              7,451
              
              
              
              9,061Unearned
      revenue, current and long term
              
              
              9,438
              
              
              
              8,840
              
              
              
              6,261
              
              
              
              6,090
              
              
              
              5,064Total
      liabilities
              
              
              13,477
              
              
              
              14,396
              
              
              
              15,001
              
              
              
              15,459
              
              
              
              15,681Total
      stockholders' equity
              
              
              12,264
              
              
              
              9,595
              
              
              
              13,634
              
              
              
              20,571
              
              
              
              24,185





(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 Item 2 above or under Note
      11 to the Consolidated Financial Statements for further information on
      this lease termination.


18


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




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. We undertake 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 we file from time to time with
the Securities and Exchange Commission.




Introduction





Onvia is
a leading provider of business solutions that help companies plan, market and
sell to targeted markets throughout the United States, or U.S.  We
have developed a unique process for collecting and organizing transactional
information, which we convert into actionable market
intelligence.  Our business solutions provide our clients with a
distinct competitive advantage.





Many
companies react to business opportunities instead of proactively and
intelligently pursuing the best prospects for their products and
services.  Onvia’s business solutions help clients more effectively
target federal, state, local and educational purchasing entities, and as of
February 2008, our solutions include in-depth analysis on early stage commercial
and residential infrastructure projects.  Our business solutions allow
clients to track their competitors, analyze market trends, and identify new
market opportunities to stay ahead of market changes.  Our clients can
leverage our historical database to identify prospects, establish alerts for
upcoming contracting opportunities, review history on public and private
infrastructure projects, and research government agencies and private sector
companies to effectively establish and maintain lucrative business
relationships.





Onvia’s
proprietary database, Onvia Dominion®, 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 4.6
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 63,000 current and historical
opportunities covering activity within the top 76 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.





Our
revenues are currently generated from two main business channels: client
subscriptions and content licenses.  Contracts for our
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 Onvia’s business
intelligence data to their customers.  Content license contracts are
generally multi-year arrangements that are invoiced on a monthly or quarterly
basis, and these agreements generally 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.  We
also generate revenue from fees charged for document download services, list
rental services, and other market intelligence reports, and these fees are
recognized upon delivery.


19





Management
Overview




Onvia’s
financial objectives during 2007 included accelerating revenue growth and
generating positive operating cash flow for the year, and we achieved both of
these goals during 2007.  Year-over-year revenue growth from 2005 to
2006 was 14% and we improved this growth rate to 25% in 2007 compared to
2006.  Revenue was $20.9 million in 2007 compared to $16.7 million in
2006.  We also generated $2.1 million in cash flow from operations,
compared to $3.6 million and $6.6 million used in operations during 2006 and
2005, respectively.





Revenue
growth in the second half of 2007 slowed modestly for the first time since the
launch of our last major product, Onvia Business Builder.  We believe
this is primarily due to a slowdown in client upgrade rates as an increasing
number of our clients now subscribe to Onvia Business Builder, and a decrease in
the size of our acquisition sales force.  To maximize future revenue
growth rates we plan to increase the size of our acquisition sales force in
2008, and in February 2008 we launched a major new product, Onvia Planning and
Construction.  We are traditionally known for our expertise in the
public sector, but this new product expands our solutions to include information
about the commercial and residential development market and fills an information
gap in the marketplace by providing early-stage project
information.





In July
2007, we terminated the lease on our former corporate headquarters and signed a
new lease for a new corporate headquarters with approximately 35,000 square feet
of rentable office space.  The termination of our former office lease
resulted in the reversal of our $2.7 million idle lease accrual during 2007 and
acceleration of depreciation on existing leasehold improvements to coincide with
the revised lease termination date.  Acceleration of depreciation on
these leasehold improvements increased our operating expenses by
$776,000.  We also incurred additional operating expenses related to
rent on our new corporate headquarters building and office relocation expenses
amounting to $237,000 during 2007.  The net impact of these lease
transactions during 2007 was a reduction of $1.6 million in operating expenses
for the year.





Management
evaluates four key operating metrics, among others, to assist in the evaluation
of our operating performance, and believes these metrics provide a means to
compare our business with other businesses in the information
industry.  The operating metrics used to measure our two business
channels are as follows: number of clients, annual contract value, annual
contract value per client, and quarterly contract value per client.





Number of
Clients


Number of
clients represents the number of individual businesses subscribing to our
products.  At December 31, 2007 we had approximately 8,500 clients,
down from approximately 9,200 at December 31, 2006.  The decrease in
clients was expected and is primarily the result of the Company’s decision to
focus it sales and marketing efforts toward retention of high-value clients and
migration of entry level clients into our database products.  Client
subscribing to our database products have greater lifetime value to the Company
than do clients subscribing to our entry-level products.  In addition,
we experienced a decline in new client acquisitions in the fourth quarter of
2007 compared to the same quarter in the prior year.  In the fourth
quarter of 2006 we employed eight more acquisition sales people than in the
fourth quarter of 2007.  This sales force reduction was planned to
improve distribution and conversion of our internally generated sales
leads.  Our sales force was more productive on a per sales person
basis; however, the improved productivity did not offset the transaction volume
lost due to the smaller sales force.





Annual Contract Value, or
ACV


Annual
contract value is the aggregate annual revenue value of our subscription client
base.  Growth in annual contract value demonstrates our success in
increasing the number of high value clients and upgrading existing clients into
new and higher valued products.  At December 31, 2007, annual contract
value was $17.6 million, up 14% compared to $15.5 million at December 31,
2006.





Annual Contract Value per
Client, or ACVC


Annual
contract value per client is the annual contract value divided by the number of
clients and indicates the average value of each of our
subscriptions.  At December 31, 2007, ACVC was $2,064, compared to
$1,692 at December 31, 2006, an increase of 22%.  These increases were
driven by increased adoption of Onvia Business Builder and Onvia Navigator and
scheduled price increases.





Quarterly Contract Value per
Client, or QCVC


Quarterly
contract value per client represents the average annual contract value of all
new and renewing clients transacting during the quarter and is a leading
indicator of future annual contract value per client.  QCVC increased
to $2,204 in the fourth quarter of 2007 compared to $1,810 in the fourth quarter
of 2006 and $2,163 in the third quarter of 2007.


20




In 2007,
we increased revenue 25% to $20.9 million, compared to $16.7 million in 2006, as
a result of increases in ACVC and sales of management reports.  Gross
margin improved to 82% in 2007, compared to 80% in 2006, as a result of
efficiencies in our research group.  Operating expenses decreased 11%
to $17.7 million, compared to $19.8 million in 2006, primarily as a result of
the reversal of our idle lease accrual as discussed in more detail below. We
generated net income of $494,000 in 2007, or $0.06 per diluted share, compared
to a net loss of $5.5 million, or $0.70 per diluted share in
2006.  Net income in 2007 includes a net $1.6 million decrease to
operating expenses related to a series of lease transactions as discussed
below.





Operating
cash flow improved 157% to a positive $2.1 million in the twelve months ended
December 31, 2007 compared to cash used in operations of $3.6 million in the
same period in 2006.  The improvement is primarily due to increased
sales during 2007 and a decrease in idle lease payments compared to
2006.  Year over year, unearned revenue increased 7% to $9.4 million
at December 31, 2007, compared to $8.8 million at December 31,
2006.  Unearned revenue represents the unrecognized value of paid or
billed client subscriptions and content license contracts.





Our
solutions cater to a large number of small to medium sized businesses, many of
which are involved in the construction market and may be adversely affected by
the current tightening in the U.S. credit market and the slowdown in the
commercial and residential development market.  We are uncertain what
the current economic situation may have had on our fourth quarter 2007 operating
results and what impact it may have on our results in 2008 and
beyond.





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 U.S. 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 client subscriptions and content
licenses.  Subscription revenues are generally prepaid at the
beginning of the subscription term. Our subscription services are generally
annual agreements; however, we also offer, on a limited basis, extended
multi-year contracts to our subscription clients. Content licenses are generally
multi-year agreements and are typically invoiced on a monthly or quarterly
basis.  Subscription fees 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.  Revenue from these 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 Emerging Issues
Task Force 00-21, or EITF 00-21, Revenue Arrangements with Multiple
Deliverables, we allocated revenue from these bundled sales ratably
between the subscription services and the management information 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.








Internal
Use Software





We
account for the costs to develop or obtain software for internal use in
accordance with 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


21


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
2007 we abandoned $45,000 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.  Our technology team is currently undertaking an initiative
to revise our technology platform to significantly enhance the functionality and
scalability of new and existing products and processes.  As a result
of this initiative, we no longer believe that the code originally developed will
be compatible with the revised platform and we believe that these costs have no
future value to the Company.  The $45,000 abandonment represents the
full capitalized value of these assets and is included in operating expenses
under the general and administrative category in the year ended December 31,
2007.




Non-cash
Stock-Based Compensation




We
account for non-cash stock-based compensation pursuant to the provisions of
Statement of Financial Accounting Standards (“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 stock options is determined using the Black-Scholes valuation model,
which is consistent with our valuation techniques previously utilized for
options in footnote disclosures required under SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation — Transition and Disclosure—an amendment of FASB Statement No.
123.  Such value is recognized as expense over the service
period, net of estimated forfeitures, using the accelerated method under
Financial Accounting Standards Board, or FASB, Interpretation No. 28, or FIN 28,
Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans. 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 to the consolidated financial
statements for additional information on the estimation of these
variables.  Actual results, and future changes in estimates, may
differ substantially from our current estimates.




Lease
Obligations




In July
2007, we entered into a Tri-Party Agreement with Blume Yale Limited Partnership,
or Blume, and the Bill & Melinda Gates Foundation, or Gates Foundation, and
a Termination of Lease Agreement with Blume providing for the simultaneous
termination of our lease with Blume and the addition of the space previously
occupied by Onvia to the Gates Foundation’s lease agreement with
Blume.  The termination of our lease with Blume was effective January
11, 2008.  Subsequent to the termination date, we have no further
obligation on this space.  The letter of credit on our $3.5 million
security deposit was returned on March 21, 2008.





Concurrent
with the termination of our Blume lease, we entered into a new lease with GRE
509 Olive LLC, or GRE, for approximately 35,000 square feet of corporate office
space in a new building in Seattle, Washington.  The lease term
expires in October 2015.  Delivery of the office space is staggered
beginning in August 2007 through April 2008.  Base rental payments on
the new lease are abated until October 2008; however, pursuant to the guidance
in SFAS 13, Accounting for
Leases, we began recognizing rent expense on a straight line basis over
the term of the lease beginning in August 2007.




Accounts
Receivable and Allowance for Doubtful Accounts




We record
accounts receivable for the 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
portion of our enterprise contracts or content licenses. As of December 31, 2007
and 2006, the unbilled portion of enterprise contracts and content licenses was
approximately $1.6 million and $3.1 million, respectively. 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.




22


Contractual
Obligations




Future
required payments under contracts, excluding operating expenses for our lease
obligations, as of December 31, 2007 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
              
              $
              7,712,842
              
              
              $
              244,921
              
              
              $
              3,096,040
              
              
              $
              2,219,185
              
              
              $
              2,152,696Purchase
      obligations (1)
              
              
              2,761,862
              
              
              
              913,452
              
              
              
              827,460
              
              
              
              1,020,950
              
              
              
              -Capital
      lease obligations (2)
              
              
              228,003
              
              
              
              133,272
              
              
              
              94,731
              
              
              
              -
              
              
              
              -Other
      operating lease obligations (3)
              
              
              39,037
              
              
              
              20,367
              
              
              
              18,670
              
              
              
              -
              
              
              
              -Total
              
              $
              10,741,744
              
              
              $
              1,312,012
              
              
              $
              4,036,901
              
              
              $
              3,240,135
              
              
              $
              2,152,696





(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.








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 31,2007
              
              
              2006
              
              
              2005Revenue:Subscription
              
              $
              17,802
              
              
              
              85.1
              %
              
              $
              14,412
              
              
              
              86.1
              %
              
              $
              12,961
              
              
              
              88.1
              %Content
      license
              
              
              2,442
              
              
              
              11.7
              %
              
              
              2,111
              
              
              
              12.6
              %
              
              
              1,546
              
              
              
              10.5
              %Management
      information reports
              
              
              454
              
              
              
              2.2
              %
              
              
              -
              
              
              
              0.0
              %
              
              
              -
              
              
              
              0.0
              %Other
              
              
              230
              
              
              
              1.0
              %
              
              
              216
              
              
              
              1.3
              %
              
              
              207
              
              
              
              1.4
              %Total
      revenue
              
              
              20,928
              
              
              
              100.0
              %
              
              
              16,739
              
              
              
              100.0
              %
              
              
              14,714
              
              
              
              100.0
              %Cost
      of revenue
              
              
              3,731
              
              
              
              17.8
              %
              
              
              3,395
              
              
              
              20.3
              %
              
              
              3,281
              
              
              
              22.3
              %Gross
      margin
              
              
              17,197
              
              
              
              82.2
              %
              
              
              13,344
              
              
              
              79.7
              %
              
              
              11,433
              
              
              
              77.7
              %Sales
      and marketing expenses
              
              
              11,729
              
              
              
              56.0
              %
              
              
              11,712
              
              
              
              70.0
              %
              
              
              10,347
              
              
              
              70.3
              %Technology
      and development expenses
              
              
              4,411
              
              
              
              21.1
              %
              
              
              4,215
              
              
              
              25.2
              %
              
              
              4,036
              
              
              
              27.4
              %General
      and administrative expenses
              
              
              4,198
              
              
              
              20.1
              %
              
              
              3,980
              
              
              
              23.7
              %
              
              
              3,484
              
              
              
              23.7
              %Idle
      lease accrual
              
              
              (2,653
              )
              
              
              (12.7
              %)
              
              
              (67
              )
              
              
              (0.4
              %)
              
              
              1,228
              
              
              
              8.3
              %Total
      operating expenses
              
              
              17,685
              
              
              
              84.5
              %
              
              
              19,840
              
              
              
              118.5
              %
              
              
              19,095
              
              
              
              129.7
              %Loss
      from operations
              
              
              (488
              )
              
              
              (2.3
              %)
              
              
              (6,496
              )
              
              
              (38.8
              %)
              
              
              (7,662
              )
              
              
              (52.0
              %)Interest
      and other income, net
              
              
              982
              
              
              
              4.7
              %
              
              
              952
              
              
              
              5.7
              %
              
              
              742
              
              
              
              5.0
              %Net
      income / (loss)
              
              $
              494
              
              
              
              2.4
              %
              
              $
              (5,544
              )
              
              
              (33.1
              %)
              
              $
              (6,920
              )
              
              
              (47.0
              %)





Comparison
of Years Ended December 31, 2007, 2006 and 2005




Revenue


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 is primarily
driven by an increase in ACVC and revenue generated from our new management
information report products.  The increase in ACVC is attributable to
increased adoption of our Onvia Business Builder and Onvia Navigator products,
upgrading clients into higher valued products and scheduled price
increases.  If adoption of Onvia Business Builder, Onvia Planning and
Construction and other anticipated new products is consistent with our
expectations, we expect to continue to see improvement in our ACVC as well as an
increase in client retention rates in future periods.


23


Revenue
increased 14% to $16.7 million for the year ended December 31, 2006, compared to
$14.7 million for the year ended December 31, 2005. The increase was primarily
driven by an increase in ACVC for the same reasons discussed above.




Cost
of Revenue


Cost of
revenue increased 10% to $3.7 million, or 17.8% of revenue, for the year ended
December 31, 2007, compared to $3.4 million, or 20.3% of revenue, for the year
ended December 31, 2006 for a total increase of $337,000 in 2007.  Our
cost of revenue consists primarily of payroll related expenses associated with
collecting, categorizing and publishing our content, and also includes
third-party content fees and credit card processing fees. Third-party content
and credit card processing fees were approximately $1.1 million and $995,000 for
the years ended December 31, 2007 and 2006, respectively. Cost of revenue
increased in total due primarily to increases of $159,000 in payroll and
contract labor related expenses, $130,000 in third-party content costs, and
$34,000 in recruiting fees.  Payroll expenses increased as a result of
normal performance-based salary increases.  Contract labor and
third-party content fees increased as a result of increased information
requirements for new product initiatives.  Weighted average headcount
on our research team was flat at 53 during 2007 and 2006.  Recruiting
fees increased due to the recruitment of a new senior management role on our
research team.  We expect to see continued increases in cost of
revenue in 2008 as we add additional content and new products to our offering;
however, we expect that gross margin will remain relatively stable as a
percentage of revenue.





Cost
of revenue increased 3% to $3.4 million, or 20.3% of revenue, for the year ended
December 31, 2006, compared to $3.3 million, or 22.3% of revenue, for the year
ended December 31, 2005.  Third-party content and credit card
processing fees were approximately $995,000 and $1.1 million for the years ended
December 31, 2006 and 2005, respectively. Cost of revenue increased in total due
in part to an increase of $235,000 in payroll related expenses as a result of
headcount growth in our research team.  Weighted average headcount on
our research team was 53 during 2006, compared to 43 during
2005.  Headcount increased as a result of increased content
requirements for new products. This increase was partially offset by a decrease
of $157,000 in third-party content fees as a result of the expiration and
renegotiation of content contracts.




Sales
and Marketing


Sales and
marketing expenses were $11.7 million, or 56.0% of revenue, and $11.7 million,
or 70.0% of revenue, for the years ended December 31, 2007 and 2006,
respectively, representing an aggregate increase of $16,000. Although total
sales and marketing expenses were relatively flat over the comparable periods,
we did see changes in the following categories for our sales and marketing
group: Payroll related expenses decreased by $353,000 as a result of a decrease
in weighted average headcount to 79 during 2007, compared to 91 during 2006 as a
result of planned attrition.  Non-cash stock-based compensation
decreased $166,000 because we recognize this expense on an accelerated basis
pursuant to the provisions of FIN 28 and the majority of our outstanding options
were granted prior to 2007.  We also increased our estimated
forfeiture rate used to calculate non-cash stock-based compensation expense in
2007, because we experienced an increase in actual forfeitures of options during
2007 compared to 2006.  Marketing expenses decreased $135,000, because
we focused more of our marketing budget towards the development of our new
website in 2007 and these costs were capitalized.  Telecom expenses
decreased $68,000 as a result of new telecom contracts.  These
decreases were partially offset by increases of $685,000 in allocated expenses
and $90,000 in recruiting fees.  Allocated expenses increased as a
result of an overall increase in depreciation and amortization related to
accelerated depreciation of leasehold improvements due to our lease
termination.  Allocated expenses consist of depreciation, amortization
and other allocated expenses, and they are allocated based on headcount in the
respective departments.  Recruiting fees increased as a result of fees
incurred for filling senior leadership in our sales organization, including our
new Senior Vice President of Sales.





Sales and
marketing expenses were $11.7 million, or 70.0% of revenue, and $10.3 million,
or 70.3% of revenue, for the years ended December 31, 2006 and 2005,
respectively, representing an increase of $1.4 million, or 13%. The increase in
total is attributable in part to an increase of $1.9 million in payroll-related
expenses due to planned increases in headcount, increases in commissions due to
higher sales in 2006 and normal merit increases.  Weighted average
headcount in our sales and marketing teams was 91 in 2006, compared to 77 in
2005. We also saw increases of $443,000 in stock-based compensation related to
the adoption of FAS 123R, $334,000 in allocated expenses due to growth in
headcount, and $141,000 in telecom expenses primarily attributable to the
increased use of web conferencing under our new sales
methodology.  These increases were partially offset by a decrease of
$1.3 million in marketing-related expenses due to a decrease in direct marketing
expenses as a result of the implementation of a new sales methodology, and a
decrease of $93,000 in consulting expenses.  Consulting expenses
incurred during 2005 related to fees to assist in the implementation of the new
sales methodology and these fees were not incurred during 2006.




Technology
and Development


Technology
and development expenses were $4.4 million, or 21.1% of revenue, and $4.2
million, or 25.2% of revenue, for the years ended December 31, 2007 and 2006,
respectively, representing an increase of $196,000, or 5%. The increase in total
is primarily attributable to increases of $450,000 in allocated expenses,
$160,000 in recruiting fees, $80,000 in payroll related expenses, and $28,000 in
travel expenses.  Allocated expenses increased because of an overall
increase in


24


depreciation
and amortization as discussed above.  Recruiting fees increased
because the competitive employment market in Seattle necessitated the use of
outside recruiters to fill open technology positions to a greater extent than in
2006.  While weighted average headcount in this group decreased to 29
in 2007 compared to 33 in 2006, payroll related expenses increased principally
due to severance payments to our former Chief Information Officer, normal
performance-based salary increases and a shift toward filling open positions
with more senior level personnel on our technology team. These increases were
partially offset by an increase of $551,000 in capitalization of internal use
software costs in 2007 compared to 2006.  Capitalized costs increased
in 2007 because of a replatform initiative being undertaken by our technology
group that is intended to make our overall technology platform more scalable,
and because of the development of the new Onvia Planning and Construction
product.





Technology
and development expenses were $4.2 million, or 25.2% of revenue, and $4.0
million, or 27.4% of revenue, for the years ended December 31, 2006 and 2005,
respectively, representing an increase of $179,000, or 4%. The increase in total
is attributable to increases of $81,000 in payroll related expenses due to
normal performance-based increases and increases in recruiting fees for new
hires, an increase of $80,000 in stock-based compensation expense due to
adoption of FAS 123R, and an increase of $48,000 in amortization of software
maintenance and license fees and other allocated expenses.  Weighted
average headcount in this group was 33 in 2006, compared to 35 in
2005.  Capitalization of internal use software costs increased by
$29,000 in 2006 compared to 2005, partially offsetting the increases in total
expenses discussed above.




General
and Administrative


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.  The expense recorded for abandoned assets is
discussed in more detail under “Application of Critical Accounting Policies and
Management Estimates” above.  These increases were partially offset by
decreases of $175,000 in non-cash stock-based compensation, and $43,000 in
professional fees.  Stock-based compensation decreased because of the
accelerated recognition of these expenses as discussed
above.  Professional fees decreased primarily due to a reduction in
legal fees.





General
and administrative expenses were $4.0 million, or 23.7% of revenue, and $3.5
million, or 23.7% of revenue, for the years ended December 31, 2006 and 2005,
respectively, representing an increase of $496,000, or 14%.  The
increase in total was primarily attributable to increases of $625,000 in
stock-based compensation due to the adoption of FAS 123R, and $52,000 in
payroll-related expenses due to normal performance-based salary increases, and
increases in contract labor and consultants.  Weighted average
headcount in this group was 11 in both 2006 and 2005.  These increases
were partially offset by a decrease of $62,000 in recruiting fees due to fewer
senior management hires in 2006, $56,000 in travel-related expenses due to a
reduction in travel, and $39,000 in insurance expenses due to a reduction in our
insurance premiums.




Non-cash
Stock-Based Compensation


We
adopted FAS 123R using the modified prospective method beginning January 1,
2006. Under this transition method, our reported stock-based compensation
expense includes: a) expense related to the remaining unvested portion of awards
granted prior to January 1, 2006, which is based on the grant date fair value
estimated in accordance with the original provisions of SFAS No. 123 using the
Black-Scholes valuation model; and b) expense related to awards granted
subsequent to January 1, 2006, which is based on the grant date fair value
estimated in accordance with the provisions of FAS 123R using the Black-Scholes
valuation model.  We recognize compensation expense for all grants
using the accelerated amortization method under FIN 28.





FAS 123R
requires that stock-based compensation expense be based on awards that are
ultimately expected to vest; therefore, stock-based compensation for the year
ended December 31, 2007 has been reduced for estimated forfeitures. When
estimating forfeitures, we consider trends of actual option forfeitures as well
as expected future activity.





Onvia’s
Savings and Retirement Plan (the “Retirement Plan”) has a provision to allow a
discretionary matching contribution, made in Onvia common stock, equal to 25% of
every dollar up to 6% of all eligible employee
contributions.  Matching contributions are made 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.  Matching contributions were authorized for both
the


25


2007 and
2006 plan years.  Stock-based compensation expense associated with
these matches was $58,864 and $94,051 for the years ending December 31, 2007 and
2006, respectively.





We
recorded $927,000 and $1.3 million of non-cash stock-based compensation expense
for the years ended December 31, 2007 and 2006, respectively.




Idle
Lease Charges


Onvia
recorded net decreases to operating expenses of $2.7 million and $67,000 in 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. Please refer to the discussion under
“Lease Obligations” above for a detailed discussion of the adjustment to the
idle lease accrual in 2007.  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 through 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
              )
              
              $
              3,779,215





AmountsAccruals
      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
              )
              
              $
              -






Interest
and Other Income, Net


Net
interest and other income 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.  Net interest and
other income was $982,000, $952,000 and $742,000 for the years ended December
31, 2007, 2006 and 2005, respectively.  The increases in 2007 and 2006
are primarily attributable to an increase in short term interest rates compared
to the previous years.  Other income in 2005 was partially offset by a
$50,000 loss on the settlement of a note receivable from our former Chief
Strategy Officer.  Interest expense was $16,000, $0 and $0 for the
years ended December 31, 2007, 2006 and 2005, respectively.  Interest
expense in 2007 relates to capital leases for server equipment.




Provision
for Income Taxes


We have
incurred net operating losses, or NOL, from our inception through the second
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.





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


On
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, Accounting for Uncertainty
in Income Taxes – an interpretation of FASB Statement No. 109, or FIN 48,
which clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.
At January 1, 2007 and December 31, 2007, the Company had no unrecognized tax
benefits.  Accrued interest on tax positions is recorded as a
component of interest expense, but is insignificant at December 31,
2007.  Based on information currently available, we do not reasonably
believe that the unrecognized tax benefit will change significantly within the
next twelve months.




Net
Income and Loss and Adjusted Net Loss





For the
year ended December 31, 2007 we reported net income of $494,000, compared to net
losses of  $5.5 million and $6.9 million in 2006 and 2005,
respectively.  Net income for the year ended December 31, 2007
includes the impact of a series of lease transactions, which resulted in the
reversal of $2.7 million of our idle lease accrual offset by an increase of $1.0
million in additional depreciation, rent expense and office relocation
expenses.  Please refer to the “Lease Obligations” discussion above
for a more detailed discussion of these lease transactions.  The
change from a net loss position to a net income position is primarily related to
increases in revenue and containment of operating expenses as discussed above in
conjunction with the impact of the lease transactions.





In
addition to the discussion of our GAAP net income, we believe it is important to
discuss our net income on an adjusted basis exclusive of the impacts of our idle
lease transactions to better demonstrate results from our core
business.  The following table presents a reconciliation of our fiscal
2007 GAAP net income and net loss to Adjusted Net Loss, which excludes the
impact of these transactions:




Year
      Ended December 31, 2007
                
                
                Year
      Ended December 31, 2006
                
                
                Year
      Ended December 31, 2005As
      Reported
                
                
                Lease
      Impact
                
                
                Adjusted
                
                
                As
      Reported
                
                
                Lease
      Impact
                
                
                Adjusted
                
                
                As
      Reported
                
                
                Lease
      Impact
                
                
                AdjustedRevenueSubscription
                
                $
                17,801,522
                
                
                $
                -
                
                
                $
                17,801,522
                
                
                $
                14,411,914
                
                
                $
                -
                
                
                $
                14,411,914
                
                
                $
                12,961,473
                
                
                $
                -
                
                
                $
                12,961,473Content
      license
                
                
                2,441,753
                
                
                
                -
                
                
                
                2,441,753
                
                
                
                2,110,634
                
                
                
                -
                
                
                
                2,110,634
                
                
                
                1,546,447
                
                
                
                -
                
                
                
                1,546,447Management
      information reports
                
                
                453,993
                
                
                
                -
                
                
                
                453,993
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Other
                
                
                230,660
                
                
                
                -
                
                
                
                230,660
                
                
                
                215,972
                
                
                
                -
                
                
                
                215,972
                
                
                
                205,951
                
                
                
                -
                
                
                
                205,951Total
      revenue
                
                
                20,927,928
                
                
                
                -
                
                
                
                20,927,928
                
                
                
                16,738,520
                
                
                
                -
                
                
                
                16,738,520
                
                
                
                14,713,871
                
                
                
                -
                
                
                
                14,713,871Cost
      of revenue
                
                
                3,731,224
                
                
                
                -
                
                
                
                3,731,224
                
                
                
                3,394,612
                
                
                
                -
                
                
                
                3,394,612
                
                
                
                3,281,070
                
                
                
                -
                
                
                
                3,281,070Gross
      margin
                
                
                17,196,704
                
                
                
                -
                
                
                
                17,196,704
                
                
                
                13,343,908
                
                
                
                -
                
                
                
                13,343,908
                
                
                
                11,432,801
                
                
                
                -
                
                
                
                11,432,801Operating
      expenses:Sales
      and marketing
                
                
                11,728,127
                
                
                
                (799,850
                )
                
                
                10,928,277
                
                
                
                11,712,294
                
                
                
                -
                
                
                
                11,712,294
                
                
                
                10,346,978
                
                
                
                -
                
                
                
                10,346,978Technology
      and development
                
                
                4,411,205
                
                
                
                (145,738
                )
                
                
                4,265,467
                
                
                
                4,215,098
                
                
                
                -
                
                
                
                4,215,098
                
                
                
                4,036,168
                
                
                
                -
                
                
                
                4,036,168General
      and administrative
                
                
                4,197,837
                
                
                
                (67,304
                )
                
                
                4,130,533
                
                
                
                3,979,526
                
                
                
                -
                
                
                
                3,979,526
                
                
                
                3,483,135
                
                
                
                -
                
                
                
                3,483,135Idle
      lease expense
                
                
                (2,652,550
                )
                
                
                2,652,550
                
                
                
                -
                
                
                
                (66,691
                )
                
                
                66,691
                
                
                
                -
                
                
                
                1,228,160
                
                
                
                (1,228,160
                )
                
                
                -Total
      operating expenses
                
                
                17,684,619
                
                
                
                1,639,658
                
                
                
                19,324,277
                
                
                
                19,840,227
                
                
                
                66,691
                
                
                
                19,906,918
                
                
                
                19,094,441
                
                
                
                (1,228,160
                )
                
                
                17,866,281Loss
      from operations
                
                
                (487,915
                )
                
                
                (1,639,658
                )
                
                
                (2,127,573
                )
                
                
                (6,496,319
                )
                
                
                (66,691
                )
                
                
                (6,563,010
                )
                
                
                (7,661,640
                )
                
                
                1,228,160
                
                
                
                (6,433,480
                )Interest
      and other income, net
                
                
                982,281
                
                
                
                -
                
                
                
                982,281
                
                
                
                952,475
                
                
                
                -
                
                
                
                952,475
                
                
                
                741,921
                
                
                
                -
                
                
                
                741,921Net
      income / (loss)
                
                $
                494,366
                
                
                $
                (1,639,658
                )
                
                $
                (1,145,292
                )
                
                $
                (5,543,844
                )
                
                $
                (66,691
                )
                
                $
                (5,610,535
                )
                
                $
                (6,919,719
                )
                
                $
                1,228,160
                
                
                $
                (5,691,559
                )Unrealized
      gain on available-for-sale securities
                
                
                5,604
                
                
                
                -
                
                
                
                5,604
                
                
                
                17,418
                
                
                
                -
                
                
                
                17,418
                
                
                
                7,664
                
                
                
                -
                
                
                
                7,664Comprehensive
      income / (loss)
                
                $
                499,970
                
                
                $
                (1,639,658
                )
                
                $
                (1,139,688
                )
                
                $
                (5,526,426
                )
                
                $
                (66,691
                )
                
                $
                (5,593,117
                )
                
                $
                (6,912,055
                )
                
                $
                1,228,160
                
                
                $
                (5,683,895
                )Basic
      net income / (loss) per common share
                
                $
                0.06
                
                
                $
                (0.20
                )
                
                $
                (0.14
                )
                
                $
                (0.70
                )
                
                $
                (0.01
                )
                
                $
                (0.71
                )
                
                $
                (0.89
                )
                
                $
                0.16
                
                
                $
                (0.73
                )Diluted
      net income / (loss) per common share
                
                $
                0.06
                
                
                $
                (0.20
                )
                
                $
                (0.14
                )
                
                $
                (0.70
                )
                
                $
                (0.01
                )
                
                $
                (0.71
                )
                
                $
                (0.89
                )
                
                $
                0.16
                
                
                $
                (0.73
                )Basic
      weighted average shares outstanding
                
                
                8,086,622
                
                
                
                8,086,622
                
                
                
                8,086,622
                
                
                
                7,887,989
                
                
                
                7,887,989
                
                
                
                7,887,989
                
                
                
                7,813,996
                
                
                
                7,813,996
                
                
                
                7,813,996Diluted
      weighted average shares outstanding
                
                
                8,605,968
                
                
                
                8,086,622
                
                
                
                8,086,622
                
                
                
                7,887,989
                
                
                
                7,887,989
                
                
                
                7,887,989
                
                
                
                7,813,996
                
                
                
                7,813,996
                
                
                
                7,813,996




Adjusted
Net Loss for the year ended December 31, 2007 was $1.1 million, compared to $5.6
million for the same period in 2006 and $5.7 million in 2005, representing an
improvement of $4.5 million, or 80% in 2007 compared to 2006.  The
improved results in 2007 are due to increases in revenue and containment of
operating costs as discussed above.  Adjusted Net Loss in 2006
improved moderately compared to 2005 despite increases in operating expenses as
discussed above because of an increase in revenue in 2006 compared to
2005.




27


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 $14.3 million at December 31, 2007, and our working capital was
$9.6 million. From December 31, 2006 to December 31, 2007, our cash, cash
equivalents and short-term investments decreased $134,000, primarily due to the
payment of $2.7 million for reimbursable tenant improvements, which will be
reimbursed to us during the first quarter of 2008.  The outlay for
these reimbursable tenant improvements was partially offset by the receipt of
$1.2 million for stock option exercises and purchases under our Employee Stock
Purchase Plan, and the maturity of $1.5 million in long-term
investments.  We also used approximately $1.1 million on payments for
our previously idle office space.  We terminated the lease for this
office space in 2007 and we will not incur fees associated with this space in
2008.





Although
we generated positive cash flow from operations in 2007, we may not be able to
generate positive cash flow from operations in the future; however, we do expect
to generate recurring positive cash flows from operations before we would be
required to seek additional financing to fund operations by increasing client
retention and acquisition, 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.




In July
2007 we entered into agreements to terminate the lease on our prior corporate
headquarters building and entered into a new lease agreement for new office
space.  The termination of our previous lease was effective upon
relocation to our new office, which occurred in January 2008.  As a
result of these transactions, the security deposit of $3.5 million on our
previous lease was returned to us on March 21, 2008.  In July 2007, we
issued a new security deposit of $538,000 for the new lease, which will be
returned annually on a straight-line basis over the next four
years.





We expect
cash flows over the original term of our previous lease (through April 2010) to
improve by approximately $3.2 million as a result of these transactions;
however, this improvement will be partially offset by approximately $1.0 million
in tenant-improvement costs to build-out the new office space.  These
build-out costs are expected to be incurred in the first half of
2008.  Please refer to the “Lease Obligations” discussion above for a
more detailed description of these lease transactions.





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
provided by operating activities was $2.1 million for the year ended December
31, 2007, compared to net cash used in operating activities of $3.6 million and
$6.6 million for the years ended December 31, 2006 and 2005,
respectively.  The change from net cash used in operating activities
to net cash provided by operating activities is primarily attributable to an
increase in sales in 2007 compared to 2006 and a decrease in payments on our
idle leased office space.





The
decrease in cash used in 2006 compared to 2005 was primarily attributable to an
increase in cash collected for unearned revenue in 2006 compared to 2005, and a
reduction in the payment of prepaid expenses related to timing of
payments.  These increases were partially offset by planned increases
in operating expenses due to the implementation of our growth strategy related
to additional headcount and new product initiatives.




Investing
Activities




Net cash
provided by investing activities was $2.6 million for the year ended December
31, 2007, compared to net cash used in investing activities of $269,000 and net
cash provided by investing activities of $12.8 million for the years ended
December 31, 2006 and 2005, respectively.




The
change to 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 expect to
be reimbursed for the tenant improvement costs in the first half of
2008.  We also saw a decrease in the purchase of property and
equipment in 2007 compared to 2006.


28


The
change to net cash used in investing activities in 2006 from net cash provided
by investing activities in 2005 is primarily due to a decrease in sales and
maturities of investments in 2006 compared to 2005 due to timing of investment
maturity dates.  In addition to the decrease in sales and maturities,
we saw an increase in the purchase of property and equipment in 2006 compared to
2005 as a result of additional requirements related to the deployment of new
products and build-out of our previous office space to accommodate existing
staff in a new floor plan subsequent to a lease amendment.  These
increases in net cash used were partially offset by the return of our security
deposit on a lease for our previous corporate headquarters, which expired in
August 2006.





Financing
Activities




Net cash
provided by financing activities was $1.2 million, $260,000 and $181,000 for the
years ended December 31, 2007, 2006 and 2005, respectively. Net cash provided by
financing activities in 2007, 2006 and 2005 was principally related to the
exercise of stock options and purchases of stock under our employee stock
purchase plan.  Increases in our stock price have resulted in an
increase in the number of option exercises compared to prior years.







Recent
Accounting Pronouncements




In
December 2007, the FASB issued SFAS No. 160, Non-Controlling Interests in
Consolidated Financial Statements – an Amendment of ARB No. 51, or FAS
160.  FAS 160 establishes new accounting and reporting standards for
the non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.  The Statement clarifies that a non-controlling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported separately as equity in the consolidated financial
statements.  This statement is effective for fiscal years beginning
after December 15, 2008 and, therefore, will be effective for us beginning in
2009.  Onvia does not currently have any minority interests and, as
such, the adoption of FAS 160 is not expected to have a material impact on our
financial position.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, or FAS 159. FAS 159 permits entities to
choose to measure selected financial instruments and certain other items at fair
value that are not currently required or permitted to be measured at fair value.
This Statement also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. This
Statement is effective no later than fiscal years beginning on or after November
15, 2007 and, therefore, will be effective for us beginning in 2008. We have
assessed the provisions of FAS 159 and determined that it is not expected to
have a material impact on our financial position or results of
operations.





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or
FAS 157.  This Statement defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements.  This Statement
does not require any new fair value measurements.  This Statement is
effective for fiscal years beginning after November 15, 2007 and, therefore,
will be effective for us beginning in 2008.  In February 2008, the
FASB issued FSP 157-2, Effective Date of FASB Statement No.
157, which delays the effective date of FAS 157 for all non-financial
assets and non-financial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually) to fiscal years beginning after November 15, 2008. Although we
will continue to evaluate the application of FAS 157, we do not currently
believe that adoption of this Statement will have a material impact on our
financial position or results of operations.





In
February 2008, the FASB issued FASB Staff Position, or FSP, 157-1, Application of FASB Statement No.
157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13, or FSP 157-1.  FSP 157-1 amends FAS 157 to
exclude SFAS No. 13, Accounting for Leases, or FAS
13, and other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under FAS 13.  This
FSP is effective upon initial adoption of FAS 157, which is effective for fiscal
years beginning after November 15, 2007 for financial assets and financial
liabilities.  We do not currently believe that adoption of this FSP
will have a material impact on our financial position or results of
operations.





In July
2006 the FASB issued FIN 48, Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement 109. The interpretation
contains a two step approach to recognizing and measuring uncertain tax
positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes.
The first step is to evaluate the tax position for recognition by determining if
the weight of available evidence indicates it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as
the largest amount which is more than 50% likely of being realized upon ultimate
settlement. The provisions of this


29


Statement
were effective for the Company beginning January 1, 2007.  The
adoption of this statement did not have a material impact on the Company’s
results of operations, financial position, or cash flows.








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.




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
$201,000 in debt related to capital leases as of December 31, 2007, 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,
auction rate securities and corporate debt securities with remaining maturities
of thirteen months or less (except auction rate securities); however, as of
December 31, 2007, 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.  A portion of our NOLs are
denominated in Canadian dollars.  We have recorded a full valuation
allowance for the net deferred tax asset associated with these NOLs, because
realization of the future tax benefit is not currently likely; therefore, we
believe our foreign currency risk exposure associated with these NOLs is
insignificant.




Equity
Price Risk




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





30


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, 2007 and 2006, and the related
consolidated statements of operations and other comprehensive income (loss),
cash flows, and changes in stockholders' equity for each of the three years in
the period ended December 31, 2007.  Our audits also included the
financial statement schedule listed in the Index at Item 15.  These
financial statements and financial statement schedule are the responsibility of
the Company's management.  Our responsibility is to express an opinion
on the financial statements and 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, 2007 and
2006, and the results of its operations, changes in stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2007, 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.





As
discussed in Note 1 to the financial statements, effective January 1, 2006, the
Company adopted the provisions of FASB Statement No. 123(R), Share-Based
Payment.





/s/    DELOITTE
& TOUCHE LLP








Seattle,
Washington


March 28,
2008





31


ITEM 8.
            CONSOLIDATED
      FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA




ONVIA,
INC.




CONSOLIDATED
BALANCE SHEETS


DECEMBER
31, 2007 AND 2006




December
      31, 2007
              
              
              December
      31, 2006ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              14,301,149
              
              
              $
              8,430,178Short-term
      investments, available-for-sale
              
              
              -
              
              
              
              6,004,955Accounts
      receivable, net of allowance for doubtful accounts of $52,143 and
      $48,157
              
              
              1,392,784
              
              
              
              814,628Prepaid
      expenses and other current assets
              
              
              549,266
              
              
              
              780,773Reimbursable
      tenant improvements
              
              
              2,663,060
              
              
              
              -Security
      deposits, current portion
              
              
              3,500,000
              
              
              
              -Total
      current assets
              
              
              22,406,259
              
              
              
              16,030,534LONG
      TERM ASSETS:Property
      and equipment, net of accumulated depreciation of $6,209,017 and
      $4,640,545
              
              
              957,189
              
              
              
              2,145,426Long-term
      investments
              
              
              -
              
              
              
              1,478,372Security
      deposits, net of current portion
              
              
              538,070
              
              
              
              3,500,000Other
      assets, net
              
              
              1,839,905
              
              
              
              836,772Total
      long term assets
              
              
              3,335,164
              
              
              
              7,960,570TOTAL
      ASSETS
              
              $
              25,741,423
              
              
              $
              23,991,104LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
              
              $
              2,220,596
              
              
              $
              455,229Accrued
      expenses
              
              
              1,334,750
              
              
              
              1,107,361Idle
      lease accrual, current portion
              
              
              -
              
              
              
              1,070,884Obligations
      under capital leases, current portion
              
              
              112,821
              
              
              
              -Unearned
      revenue, current portion
              
              
              9,096,511
              
              
              
              8,481,060Deferred
      rent, current portion
              
              
              2,627
              
              
              
              28,563Total
      current liabilities
              
              
              12,767,305
              
              
              
              11,143,097LONG
      TERM LIABILITIES:Idle
      lease accrual, net of current portion
              
              
              -
              
              
              
              2,708,331Obligations
      under capital leases, net of current portion
              
              
              88,646
              
              
              
              -Unearned
      revenue, net of current portion
              
              
              341,817
              
              
              
              359,377Deferred
      rent, net of current portion
              
              
              279,469
              
              
              
              185,717Total
      long term liabilities
              
              
              709,932
              
              
              
              3,253,425TOTAL
      LIABILITIES
              
              
              13,477,237
              
              
              
              14,396,522COMMITMENTS
      AND CONTINGENCIES (Note 12)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; 8,224,383 and
      7,961,522 shares issued; and 8,207,465 and 7,929,153 shares
      outstanding
              
              
              821
              
              
              
              793Treasury
      stock, at cost: 16,918 and 32,369 shares
              
              
              (83,067
              )
              
              
              (158,932
              )Additional
      paid in capital
              
              
              351,268,030
              
              
              
              349,174,289Accumulated
      other comprehensive loss
              
              
              -
              
              
              
              (5,604
              )Accumulated
      deficit
              
              
              (338,921,598
              )
              
              
              (339,415,964
              )Total
      stockholders’ equity
              
              
              12,264,186
              
              
              
              9,594,582TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              25,741,423
              
              
              $
              23,991,104




See notes to consolidated financial
statements.


32


ONVIA,
INC.




CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)


YEARS
ENDED DECEMBER 31, 2007, 2006 AND 2005




2007
              
              
              2006
              
              
              2005RevenueSubscription
              
              $
              17,801,522
              
              
              $
              14,411,914
              
              
              $
              12,961,473Content
      license
              
              
              2,441,753
              
              
              
              2,110,634
              
              
              
              1,546,447Management
      information reports
              
              
              453,993
              
              
              
              -
              
              
              
              -Other
              
              
              230,660
              
              
              
              215,972
              
              
              
              205,951Total
      revenue
              
              
              20,927,928
              
              
              
              16,738,520
              
              
              
              14,713,871Cost
      of revenue
              
              
              3,731,224
              
              
              
              3,394,612
              
              
              
              3,281,070Gross
      margin
              
              
              17,196,704
              
              
              
              13,343,908
              
              
              
              11,432,801Operating
      expenses:Sales
      and marketing
              
              
              11,728,127
              
              
              
              11,712,294
              
              
              
              10,346,978Technology
      and development
              
              
              4,411,205
              
              
              
              4,215,098
              
              
              
              4,036,168General
      and administrative
              
              
              4,197,837
              
              
              
              3,979,526
              
              
              
              3,483,135(Reversal
      of idle lease expense) / idle lease expense
              
              
              (2,652,550
              )
              
              
              (66,691
              )
              
              
              1,228,160Total
      operating expenses
              
              
              17,684,619
              
              
              
              19,840,227
              
              
              
              19,094,441Loss
      from operations
              
              
              (487,915
              )
              
              
              (6,496,319
              )
              
              
              (7,661,640
              )Interest
      and other income, net
              
              
              982,281
              
              
              
              952,475
              
              
              
              741,921Net
      income / (loss)
              
              $
              494,366
              
              
              $
              (5,543,844
              )
              
              $
              (6,919,719
              )Unrealized
      gain on available-for-sale securities
              
              
              5,604
              
              
              
              17,418
              
              
              
              7,664Comprehensive
      income / (loss)
              
              $
              499,970
              
              
              $
              (5,526,426
              )
              
              $
              (6,912,055
              )Basic
      net income / (loss) per common share
              
              $
              0.06
              
              
              $
              (0.70
              )
              
              $
              (0.89
              )Diluted
      net income / (loss) per common share
              
              $
              0.06
              
              
              $
              (0.70
              )
              
              $
              (0.89
              )Basic
      weighted average shares outstanding
              
              
              8,086,622
              
              
              
              7,887,989
              
              
              
              7,813,996Diluted
      weighted average shares outstanding
              
              
              8,605,968
              
              
              
              7,887,989
              
              
              
              7,813,996




See notes
to consolidated financial statements.




33


ONVIA,
INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS


YEARS
ENDED DECEMBER 31, 2007, 2006 AND 2005




Twelve
      Months Ended December 31,2007
              
              
              2006
              
              
              2005CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income / (loss)
              
              $
              494,366
              
              
              $
              (5,543,844
              )
              
              $
              (6,919,719
              )Adjustments
      to reconcile net income / (loss) to net cash provided by / (used in)
      operating activities:Depreciation
      and amortization
              
              
              2,014,105
              
              
              
              1,075,894
              
              
              
              832,368Loss
      on abandoned assets
              
              
              45,271
              
              
              
              -
              
              
              
              -Loss
      / (gain) on sale of property and equipment
              
              
              7,310
              
              
              
              (2,430
              )
              
              
              5,911Stock-based
      compensation
              
              
              927,302
              
              
              
              1,257,861
              
              
              
              84,239Change
      in operating assets and liabilities:Accounts
      receivable
              
              
              (578,156
              )
              
              
              (24,903
              )
              
              
              (178,532
              )Prepaid
      expenses and other current assets
              
              
              260,052
              
              
              
              157,132
              
              
              
              (83,712
              )Other
      assets
              
              
              17,310
              
              
              
              68,964
              
              
              
              193,900Accounts
      payable
              
              
              1,765,367
              
              
              
              (372,490
              )
              
              
              (108,912
              )Accrued
      expenses
              
              
              251,807
              
              
              
              (76,765
              )
              
              
              308,609Idle
      lease accrual
              
              
              (3,779,215
              )
              
              
              (2,758,520
              )
              
              
              (913,627
              )Unearned
      revenue
              
              
              597,891
              
              
              
              2,579,804
              
              
              
              170,693Deferred
      rent
              
              
              67,816
              
              
              
              (8,188
              )
              
              
              16,721Net
      cash provided by / (used in) operating activities
              
              
              2,091,226
              
              
              
              (3,647,485
              )
              
              
              (6,592,061
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Additions
      to property and equipment
              
              
              (345,010
              )
              
              
              (1,070,051
              )
              
              
              (436,401
              )Proceeds
      from sales of property and equipment
              
              
              -
              
              
              
              5,192
              
              
              
              7,479Additions
      to internal use software
              
              
              (1,320,540
              )
              
              
              (422,390
              )
              
              
              (571,239
              )Purchases
      of investments
              
              
              (9,044,369
              )
              
              
              (21,082,516
              )
              
              
              (33,905,505
              )Sales
      of investments
              
              
              8,270,000
              
              
              
              3,010,000
              
              
              
              12,825,000Maturities
      of investments
              
              
              8,263,300
              
              
              
              19,060,181
              
              
              
              34,860,174Payments
      for reimbursable tenant improvements
              
              
              (2,663,060
              )
              
              
              -
              
              
              
              -Payments
      for security deposits
              
              
              (538,070
              )
              
              
              -
              
              
              
              -Return
      of security deposits
              
              
              -
              
              
              
              230,548
              
              
              
              -Net
      cash provided by / (used in) investing activities
              
              
              2,622,251
              
              
              
              (269,036
              )
              
              
              12,779,508CASH
      FLOWS FROM FINANCING ACTIVITIES:Principal
      payments on capital lease obligations
              
              
              (48,993
              )
              
              
              -
              
              
              
              -Proceeds
      from exercise of stock options and purchases under employee stock purchase
      plan
              
              
              1,206,487
              
              
              
              260,006
              
              
              
              181,221Net
      cash provided by financing activities
              
              
              1,157,494
              
              
              
              260,006
              
              
              
              181,221Net
      increase / (decrease) in cash and cash equivalents
              
              
              5,870,971
              
              
              
              (3,656,515
              )
              
              
              6,368,668Cash
      and cash equivalents, beginning of period
              
              
              8,430,178
              
              
              
              12,086,693
              
              
              
              5,718,025Cash
      and cash equivalents, end of period
              
              $
              14,301,149
              
              
              $
              8,430,178
              
              
              $
              12,086,693SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Unrealized
      gain on available-for-sale investments
              
              $
              (5,604
              )
              
              $
              (17,418
              )
              
              $
              (7,664
              )Issuance
      of treasury stock for 401K matching contribution
              
              
              (83,281
              )
              
              
              (62,904
              )
              
              
              -Purchases
      under capital lease obligations
              
              
              (250,460
              )
              
              
              -
              
              
              
              -Treasury
      stock acquired as settlement of note receivable
              
              
              -
              
              
              
              -
              
              
              
              220,950




See notes
to consolidated financial statements.




34


ONVIA,
INC.




CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


YEARS
ENDED DECEMBER 31, 2007, 2006 AND 2005






Common stock
              
              
              Treasury stock
              
              
              Additional
              
              
              Accumulated
      other
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              paid in capital
              
              
              comprehensive loss
              
              
              deficit
              
              
              TotalBALANCE,
      January 1, 2005
              
              
              7,822,727
              
              
              $
              782
              
              
              
              -
              
              
              $
              -
              
              
              $
              347,553,684
              
              
              $
              (30,686
              )
              
              $
              (326,952,401
              )
              
              $
              20,571,379Exercise
      of stock options
              
              
              42,434
              
              
              
              4
              
              
              
              
              
              
              
              
              
              
              
              122,521
              
              
              
              
              
              
              
              
              
              
              
              122,525Purchases
      under Employee Stock Purchase Plan
              
              
              15,949
              
              
              
              2
              
              
              
              
              
              
              
              
              
              
              
              58,693
              
              
              
              
              
              
              
              
              
              
              
              58,695Treasury
      stock acquired as settlement of note receivable
              
              
              (45,000
              )
              
              
              (4
              )
              
              
              45,000
              
              
              
              (220,950
              )
              
              
              4
              
              
              
              
              
              
              
              
              
              
              
              (220,950
              )Noncash
      stock-based compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14,344
              
              
              
              
              
              
              
              
              
              
              
              14,344Unrealized
      gain on available-for-sale investments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,664
              
              
              
              
              
              
              
              7,664Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,919,719
              )
              
              
              (6,919,719
              )BALANCE,
      December 31, 2005
              
              
              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
              
              
              $
              -
              
              
              $
              (338,921,598
              )
              
              $
              12,264,186





See notes
to consolidated financial statements.


35


ONVIA,
INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS
ENDED DECEMBER 31, 2007, 2006 AND 2005




Note 1:
            Summary
      of Significant Accounting Policies




Description
of Business


Onvia
(together with its subsidiary, “Onvia” or the “Company”) is a primary research
company and a provider of business intelligence to business professionals about
actionable public sector revenue opportunities.  Compiled over the
last ten years, Onvia Dominion®, Onvia’s proprietary database of comprehensive,
historical and real-time information unavailable elsewhere in the market
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 by its in-house team of researchers and third-party
providers so that clients are able to quickly find and analyze information
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, 2007, 2006 or
2005.





Use
of estimates


The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions 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. Actual results could differ from those
estimates.




Revenue
recognition


Onvia’s
revenues are primarily generated from client subscriptions and content
licenses.  Onvia’s subscriptions are generally annual contracts and
revenues are generally prepaid at the beginning of the subscription term. The
Company also offers, on a limited basis, extended multi-year contracts to its
subscription clients. Content licenses are generally multi-year agreements and
are typically invoiced on a monthly or quarterly basis.  Subscription
fees and content licenses are recognized ratably over the term of the agreement.
Onvia also generates revenue from fees charged for management information
reports, document download services, and list rental services, and revenue from
these types of services is recognized upon delivery.





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





Unearned
revenue consists of payments received for prepaid subscriptions from its
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 and long-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. The fair value of Onvia’s
short and long-term investments, which is the amount recorded in the financial
statements, is based on market quotes. All investments are classified as
available-for-sale, 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 of
90 days or less to be cash equivalents.




Short-term
and long-term investments


Onvia’s
investment portfolio has historically been classified as available-for-sale and
was segregated between short-term investments and long-term investments based on
the remaining term of the instrument. The Company classified investments with
remaining maturities of more than three months and less than one year as
short-term investments, and investments with remaining maturities of more than
one year as long term investments  Long term investments are limited
to


36


original
maturities of no more than thirteen months. As of December 31, 2007, all of
Onvia’s investments were in money market funds, which are included in cash and
cash equivalents because of their short term nature.





Onvia’s
primary investment objectives are preservation of principal, a high degree of
liquidity and a maximum total return consistent with the investment
objectives.  Onvia’s investment portfolio has historically consisted
of any or all of the following (U.S. denominated only): money market funds,
commercial paper, municipal securities, auction rate securities and corporate
debt securities with remaining maturities of thirteen months or less. Pursuant
to Onvia’s investment policy, 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.  Interest earned on these
securities is included in Interest and other income. Realized gains and losses
on investments during the years ended December 31, 2007, 2006 and 2005 were
immaterial. Available-for-sale securities are carried at fair value based on
quoted market prices, and any unrealized gain or loss on the securities is
included in stockholders’ equity and reported in other comprehensive income. The
cost of securities sold is calculated using the specific identification
method.




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 money market funds as of December 31,
2007.




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 will analyze the estimated undiscounted future cash flows
to be generated from the applicable asset. In addition, the Company will record
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, 2007, 2006 or 2005.




Internal
Use Software


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. Onvia capitalized
$1.3 million, $422,000, and $571,000 in internal use software costs during the
years ended December 31, 2007, 2006 and 2005, respectively. Capitalized costs
during 2007 increased significantly compared to 2006 as a result of the
development of the Onvia Planning and Construction product and an overall
replatform of the Company’s information technology
infrastructure.  Capitalized software costs are amortized on a
straight-line basis over their expected economic lives, typically 3 to 5 years.
Amortization related to capitalized software was $266,000, $210,000 and $145,000
for the years ended December 31, 2007, 2006 and 2005, respectively.





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 bases, 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


37


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.





On
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board, or FASB, Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109, or FIN 48, which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.
The Company recognized no increase or decrease in its deferred tax assets as a
result of the implementation of FIN 48. 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,
2007, the Company held 16,918 shares of treasury stock with a cost basis of
$83,067.  The Company is using the treasury shares to fund matching
contributions to its 401K retirement plan for employee
contributions.  In February 2007, the Company issued 15,451 treasury
shares to fund matching contributions for 2006 employee contributions, and in
February 2008, the Company issued 8,837 treasury shares to fund matching
contributions for 2007 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 its 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.





38


The
following table sets forth the computation of basic and diluted net income per
share for the years ended December 31:





2007
              
              
              2006
              
              
              2005Numerator:Net
      income / (loss)
              
              $
              494,366
              
              
              $
              (5,543,844
              )
              
              $
              (6,919,719
              )Denominator:Shares
      used to compute basic net income / (loss) per share
              
              
              8,086,622
              
              
              
              7,887,989
              
              
              
              7,813,996Dilution
      associated with the Company's stock-based compensation
    plans
              
              
              519,346
              
              
              
              -
              
              
              
              -Shares
      used to compute diluted net income / (loss) per share
              
              
              8,605,968
              
              
              
              7,887,989
              
              
              
              7,813,996Basic
      net income / (loss) per share
              
              $
              0.06
              
              
              $
              (0.70
              )
              
              $
              (0.89
              )Diluted
      net income / (loss) per share
              
              $
              0.06
              
              
              $
              (0.70
              )
              
              $
              (0.89
              )





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, 2006 and 2005 options and warrants to purchase
2,133,035 and 2,161,341 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. 160, Non-Controlling Interests in
Consolidated Financial Statements – an Amendment of ARB No. 51, or FAS
160.  FAS 160 establishes new accounting and reporting standards for
the non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.  The Statement clarifies that a non-controlling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported separately as equity in the consolidated financial
statements.  This statement is effective for fiscal years beginning
after December 15, 2008 and, therefore, will be effective for Onvia beginning in
2009.  Onvia does not currently have any minority interests and, as
such, the adoption of FAS 160 is not expected to have a material impact on the
Company’s financial position.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, or FAS 159. FAS 159 permits entities to
choose to measure selected financial instruments and certain other items at fair
value that are not currently required or permitted to be measured at fair value.
This Statement also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. This
Statement is effective no later than fiscal years beginning on or after November
15, 2007 and, therefore, will be effective for us beginning in 2008. Onvia has
assessed the provisions of FAS 159 and determined that it is not expected to
have a material impact on the Company’s financial position or results of
operations.





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or
FAS 157.  This Statement defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements.  This Statement
does not require any new fair value measurements.  This Statement is
effective for fiscal years beginning after November 15, 2007 and, therefore,
will be effective for us beginning in 2008.  In February 2008, the
FASB issued FSP 157-2, Effective Date of FASB Statement No.
157, which delays the effective date of FAS 157 for all non-financial
assets and non-financial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually) to fiscal years beginning after November 15, 2008. Although we
will continue to evaluate the application of FAS 157, we do not currently
believe that adoption of this Statement will have a material impact on our
financial position or results of operations.





In
February 2008, the FASB issued FASB Staff Position, or FSP, 157-1, Application of FASB Statement No.
157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13, or FSP 157-1.  FSP 157-1 amends FAS 157 to
exclude SFAS No. 13, Accounting for Leases, or FAS
13, and other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under FAS 13.  This
FSP is effective upon initial adoption of FAS 157,


39


which is
effective for fiscal years beginning after November 15, 2007 for financial
assets and financial liabilities.  Onvia does not currently believe
that adoption of this FSP will have a material impact on its financial position
or results of operations.





In July
2006 the FASB issued FIN 48, Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement 109. The interpretation
contains a two step approach to recognizing and measuring uncertain tax
positions accounted for in accordance with SFAS No. 109. The first step is to
evaluate the tax position for recognition by determining if the weight of
available evidence indicates it is more likely than not that the position will
be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest
amount which is more than 50% likely of being realized upon ultimate settlement.
The provisions of this Statement were effective for the Company beginning
January 1, 2007.  The adoption of this statement did not have a
material impact on the Company’s results of operations, financial position, or
cash flows.




Note 2:
            Stock-Based
      Compensation and Stock Option
Activity





On
January 1, 2006, Onvia adopted the provisions of 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 compensation over the
service period for awards expected to vest. The fair value of stock options is
determined using the Black-Scholes valuation model, which is consistent with
valuation techniques previously utilized for options in footnote disclosures
required under SFAS No. 123, Accounting for Stock-Based
Compensation, or FAS 123, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation — Transition and Disclosure—an amendment of FASB Statement No.
123, or FAS 148.  Such value is recognized as expense over the
service period, net of estimated forfeitures, using the accelerated method under
FASB Interpretation No. 28, Accounting for Stock Appreciation
Rights and Other Variable Stock Option or Award Plans, or FIN 28. 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.





Onvia
adopted FAS 123R using the modified prospective method.  Under this
transition method, the Company’s reported stock-based compensation expense
includes: a) expense related to the remaining unvested portion of awards granted
prior to January 1, 2006, which is based on the grant date fair value estimated
in accordance with the original provisions of FAS 123 using the Black-Scholes
valuation model; and b) expense related to awards granted subsequent to January
1, 2006, which is based on the grant date fair value estimated in accordance
with the provisions of FAS 123R using the Black-Scholes valuation
model.  Onvia’s consolidated financial statements for the years ended
December 31, 2007 and 2006 reflect the impact of adopting FAS
123R.  In accordance with the modified prospective method, the
consolidated financial statements for prior periods have not been restated to
reflect, and do not include, the impact of FAS 123R.





Stock-Based Benefit
Plans





1999
Stock Option Plan


In
February 1999, Onvia adopted a stock option plan (the “1999 Plan”) which
provides for the issuance of incentive and nonqualified common stock options to
employees, directors and consultants of Onvia.  The options 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 shares authorized for
future issuance under the 1999 Plan as of December 31, 2007 was 264,425
shares.





2000
Directors’ Stock Option Plan


In March
2000, Onvia adopted a Directors’ Stock Option Plan (the “Directors’ Plan”).
Grants are made under this plan to each eligible board member on the date such
person is first elected or appointed as a board member.  At each
annual stockholders’ meeting, each non-employee director will be granted an
additional option to purchase 1,000 shares of common stock under the Directors’
Plan, provided such person has been a board member of Onvia for at least the
prior six months. The initial option grant under the Directors’ Plan vests 25%
each year for four years on the anniversary of the date of grant, has 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.   The total number of shares authorized for future
issuance under the Directors’ Plan as of December 31, 2007 was 6,000
shares.





40


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, 2007 was
386,298 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, 2007 and 2006 was as follows:


Years
      EndedDecember
      31,2007
              
              
              2006Cost
      of sales
              
              $
              14,013
              
              
              $
              25,063Sales
      and marketing
              
              
              311,256
              
              
              
              477,533Technology
      and development
              
              
              125,660
              
              
              
              103,927General
      and administrative
              
              
              476,373
              
              
              
              651,338Total
      stock-based compensation
              
              $
              927,302
              
              
              $
              1,257,861





Onvia
recorded $84,239 of non-cash stock-based compensation expense for the year ended
December 31, 2005.  Since Onvia has a full valuation allowance
for its deferred tax assets, there was no impact to its cash flows related to
excess tax benefits associated with the adoption of FAS 123R.





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:




2007
              
              
              2006
              
              
              2005Average
      risk free rate
              
              
              4.15
              %
              
              
              4.52
              %
              
              
              4.06
              %Volatility
              
              
              44
              %
              
              
              59
              %
              
              
              51
              %Dividends
              
              
              0
              %
              
              
              0
              %
              
              
              0
              %Expected
      life (in years)
              
              
              4.7
              
              
              
              5.0
              
              
              
              6.8




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:





2007
              
              
              2006
              
              
              2005Average
      risk free rate
              
              
              4.03
              %
              
              
              5.08
              %
              
              
              3.81
              %Volatility
              
              
              25
              %
              
              
              39
              %
              
              
              35
              %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.  In 2001, Onvia changed from a business-to-business
exchange to a business-to-government model, which represented a
substantial


41


change in
our business and significantly lowered our revenues, expenses and capital
requirements.  This change prompted a cash dividend and a one-for-ten
reverse stock split in May and July 2002, respectively, to modify our capital
structure based on our revised business model.  Management has
primarily 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 2007; however, because of the change in business model
that occurred in 2001, management also considered the volatility of the common
stock of other companies with business models similar to Onvia’s for periods
prior to Onvia’s change in business model to estimate future volatility of
Onvia’s stock to the extent necessary given the expected life of the
options.  Prior to adoption of FAS 123R, Onvia’s expected volatility
was calculated in a similar manner.





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, 2007:




Options
      Outstanding
              
              
              Weighted
      Average Exercise Price
              
              
              Weighted
      Average Remaining Contractual Term (in years)
              
              
              Aggregate Intrinsic Value(1)Total
      options outstanding at December 31, 2006
              
              
              2,083,094
              
              
              $
              7.97Options
      granted
              
              
              307,750
              
              
              
              9.50Options
      exercised
              
              
              (244,826
              )
              
              
              4.54Options
      forfeited and cancelled
              
              
              (298,455
              )
              
              
              8.77Total
      options outstanding at December 31, 2007
              
              
              1,847,563
              
              
              $
              8.55
              
              
              
              6.49
              
              
              $
              3,906,635Options
      exercisable at December 31, 2007
              
              
              1,141,381
              
              
              $
              8.29
              
              
              
              5.48
              
              
              $
              3,458,154Options
      vested and expected to vest at December 31, 2007
              
              
              1,720,127
              
              
              $
              8.52
              
              
              
              6.36
              
              
              $
              3,823,902




(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 $8.59 at December 31, 2007 for options that were in-the-money at
December 31, 2007.  The number of in-the-money options outstanding and
exercisable at December 31, 2007 was 1,033,978 and 752,283,
respectively.





The
weighted average grant date fair value of options granted during the years ended
December 31, 2007, 2006 and 2005 was $2.85, $2.40 and $2.51 per share,
respectively.  The total intrinsic value of options exercised during
the years ended December 31, 2007, 2006 and 2005 was $740,269, $157,315 and
$109,784, respectively.





As of
December 31, 2007, there was approximately $1.0 million 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 1.44 years.





During
the year ended December 31, 2007, approximately $1.2 million was received for
exercises of stock options and purchases under Onvia’s ESPP.


42





Pro-Forma Information for
Periods Prior to Adoption of FAS 123R





Prior to
the adoption of FAS 123R, Onvia elected to account for its employee and director
stock-based awards and purchases under the ESPP under the provisions of
Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to
Employees, and provided the pro-forma disclosures required under FAS 123,
as amended by FAS 148.  Accordingly, employee stock-based compensation
expense was not reflected in Onvia’s results of operations because all of its
employee and director grants were granted with exercise prices equal to or
greater than the fair market value of Onvia’s common stock on the date of
grant.  The ESPP was deemed non-compensatory under the provisions of
APB No. 25.  Forfeitures of awards were recognized as they
occurred.





Pro-forma
information for the year ended December 31, 2005 is as follows:





2005Net
      loss:As
      reported
              
              $
              (6,919,719
              )Add:
      Stock-based compensation included in reported net income
              
              
              84,239Deduct:
      Stock-based compensation determined under fair-value based
      method
              
              
              (1,661,484
              )Pro
      forma net loss
              
              $
              (8,496,964
              )Net
      loss per share:As
      reported - basic and diluted
              
              $
              (0.89
              )Pro
      forma - basic and diluted
              
              $
              (1.09
              )





Note 3:
            Short-term
      and Long-term Investments




The
Company did not hold any available-for-sale investments at December 31,
2007.  The following table summarizes, by major security type,
short-term and long-term investments classified as available-for-sale at
December 31, 2006, stated at fair value:




Amortized Cost
              
              
              Gross Unrealized Gains
              
              
              Gross Unrealized Losses
              
              
              Fair ValueCorporate
      bonds
              
              $
              3,617,677
              
              
              $
              862
              
              
              $
              (5,086
              )
              
              $
              3,613,453US
      government obligations
              
              
              3,871,465
              
              
              
              169
              
              
              
              (1,760
              )
              
              
              3,869,874$
              7,489,142
              
              
              $
              1,031
              
              
              $
              (6,846
              )
              
              $
              7,483,327




Note 4:
            Prepaid
      Expenses and Other Current Assets





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




2007
              
              
              2006Prepaid
      expenses
              
              $
              510,899
              
              
              $
              670,579Interest
      & other receivable
              
              
              32,287
              
              
              
              110,194Other
              
              
              6,080
              
              
              
              -$
              549,266
              
              
              $
              780,773





Note 5:
            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 a termination 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 on March 21, 2008 as a result of this termination.


43


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.




Note 6:
            Property
      and Equipment




Property
and equipment consists of the following at December 31:


2007
              
              
              2006Computer
      equipment
              
              $
              2,756,950
              
              
              $
              2,477,324Software
              
              
              1,074,441
              
              
              
              975,137Furniture
      and fixtures
              
              
              530,825
              
              
              
              530,825Leasehold
      improvements
              
              
              2,803,990
              
              
              
              2,802,6857,166,206
              
              
              
              6,785,971Less
      accumulated depreciation and amortization
              
              
              (6,209,017
              )
              
              
              (4,640,545
              )Net
      book value
              
              $
              957,189
              
              
              $
              2,145,426




As a
result of the termination of Onvia’s office lease on its former corporate
headquarters building, 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, the Company recorded approximately $776,000
in accelerated depreciation expense on these assets in the year ended December
31, 2007.  As of December 31, 2007, Onvia’s leasehold improvements
were fully depreciated.  Property and equipment includes $224,000 and
$0 in computer equipment under capital leases at December 31, 2007 and 2006,
respectively.  Accumulated depreciation on these leased assets was
$45,000 and $0 at December 31, 2007 and 2006, respectively.





Note 7:
            Other
      Assets





Other
assets consist of the following at December 31:




December
      31,
              
              
              December
      31,2007
              
              
              2006Internal
      use software
              
              $
              2,917,058
              
              
              $
              1,640,094Accumulated
      amortization of internal use software
              
              
              (1,078,850
              )
              
              
              (812,721
              )Long-term
      portion of prepaid software licenses
              
              
              1,697
              
              
              
              9,276Other
              
              
              -
              
              
              
              123Total
      other assets
              
              $
              1,839,905
              
              
              $
              836,772







Note 8:
            Accrued
      Expenses




Accrued
expenses consist of the following at December 31:


December
      31,
              
              
              December
      31,2007
              
              
              2006Payroll
      and related liabilities
              
              $
              1,143,574
              
              
              $
              920,639Accrued
      professional fees
              
              
              111,561
              
              
              
              143,553State
      income and other taxes payable
              
              
              79,615
              
              
              
              43,169$
              1,334,750
              
              
              $
              1,107,361





44


Note 9:
            Interest
      and Other Income, net




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


Years
      EndedDecember
      31,2007
              
              
              2006
              
              
              2005Interest
      income
              
              $
              1,008,733
              
              
              $
              968,551
              
              
              $
              801,655Loss
      on promissory note
              
              
              -
              
              
              
              -
              
              
              
              (50,330
              )Interest
      expense
              
              
              (15,561
              )
              
              
              -
              
              
              
              -Letter
      of credit fees
              
              
              -
              
              
              
              (17,993
              )
              
              
              (19,393
              )Other
      (expense) / income
              
              
              (10,891
              )
              
              
              1,917
              
              
              
              9,989Net
      interest and other income
              
              $
              982,281
              
              
              $
              952,475
              
              
              $
              741,921





Note 10:
            Income
      Taxes




At
December 31, 2007 and 2006, Onvia had tax net operating loss carryforwards of
$247,081,988 and $252,841,667, respectively, which may be used to offset future
taxable income. $3,674,694 of these carryforwards originated from Onvia’s
Canadian subsidiary and expire in 2008.  The remaining carryforwards
expire at various dates beginning in 2017 through 2027. 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
      31,2007
              
              
              2006
              
              
              2005Tax
      expense / (benefit) at statutory rate
              
              
              34.0
              %
              
              
              (34.0
              )%
              
              
              (34.0
              )%Stock-based
      compensation
              
              
              (15.1
              )
              
              
              2.7
              
              
              
              0.0Nondeductible
      goodwill
              
              
              (3.4
              )
              
              
              (0.2
              )
              
              
              (0.1
              )Other
              
              
              6.9
              
              
              
              0.4
              
              
              
              (1.1
              )Change
      in valuation allowance
              
              
              (22.4
              )
              
              
              31.1
              
              
              
              35.20.0
              %
              
              
              0.0
              %
              
              
              0.0
              %





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:


2007
              
              
              2006
              
              
              2005Net
      operating loss carryforwards
              
              $
              84,007,877
              
              
              $
              85,966,168
              
              
              $
              83,961,767Prepaid
      expenses and other assets currently deductible
              
              
              (128,249
              )
              
              
              (152,392
              )
              
              
              (216,250
              )Accrued
      expenses not currently deductible
              
              
              815,507
              
              
              
              1,766,149
              
              
              
              2,485,998Property,
      plant and equipment due to different depreciation for tax
      purposes
              
              
              1,397,935
              
              
              
              1,414,185
              
              
              
              1,466,970Net
      deferred tax assets
              
              
              86,093,070
              
              
              
              88,994,110
              
              
              
              87,698,485Less:
      Valuation allowance
              
              
              (86,093,070
              )
              
              
              (88,994,110
              )
              
              
              (87,698,485
              )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 11:
            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.





45


The
following table displays a rollforward of the idle lease accrual for the years
ending December 31, 2007, 2006 and 2005:




AmountsAccruals
      at
              
              
              
              
              
              Paid,
      Net
              
              
              Accruals
      atDecember
      31,
              
              
              2005
              
              
              of
      Sublease
              
              
              December
      31,2004
              
              
              Charges
              
              
              Income
              
              
              2005Idle
      lease charges
              
              $
              7,451,362
              
              
              $
              1,228,160
              
              
              $
              (2,141,787
              )
              
              $
              6,537,735


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
              )
              
              $
              3,779,215


AmountsAccruals
      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
      12:
            Commitments
      and Contingencies




Operating
leases


As
discussed in Note 11, 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 is
abated for the first nine months of our new office lease; however, rent expense
is being recognized on a straight-line basis over the term of the
lease.





As a
result of the termination of the lease on Onvia’s former corporate headquarters
building and the subsequent signing of a new lease in a different building, the
Company adjusted the amortization of deferred rent on its former lease and began
recognizing expense for its new lease once the new space was made available for
tenant improvements.  The net impact of these changes was an
additional $137,000 in rent expense for the twelve months ended December 31,
2007.  Total rent expense was $1,027,664, $898,716 and $918,220 for
the years ended December 31, 2007, 2006 and 2005, respectively, excluding idle
lease charges.




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




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
      Leases2008
              
              $
              244,921
              
              
              $
              20,367
              
              
              $
              265,2882009
              
              
              1,002,173
              
              
              
              18,670
              
              
              
              1,020,8432010
              
              
              1,031,722
              
              
              
              -
              
              
              
              1,031,7222011
              
              
              1,062,145
              
              
              
              -
              
              
              
              1,062,1452012
              
              
              1,093,468
              
              
              
              -
              
              
              
              1,093,468Thereafter
              
              
              3,278,413
              
              
              
              -
              
              
              
              3,278,413$
              7,712,842
              
              
              $
              39,037
              
              
              $
              7,751,879






46


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
              
              
              Total2008
              
              $
              112,821
              
              
              $
              20,451
              
              
              $
              133,2722009
              
              
              82,472
              
              
              
              5,887
              
              
              
              88,3592010
              
              
              6,174
              
              
              
              197
              
              
              
              6,371Thereafter
              
              
              -
              
              
              
              -
              
              
              
              -$
              201,467
              
              
              $
              26,535
              
              
              $
              228,002





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 2008 to 2011. Future required payments
under these non-cancellable agreements are as follows for the years ending
December 31:





PurchaseObligations2008
              
              $
              913,4522009
              
              
              752,0402010
              
              
              813,8922011
              
              
              282,478Thereafter
              
              
              -$
              2,761,862






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.   Prior to the Second Circuit’s December 5, 2006
ruling, the majority of issuers, including Onvia, and their insurers had
submitted a settlement agreement to the district court for
approval.  In light of the Second Circuit opinion, the parties agreed
that the settlement could not be approved.  On June 25, 2007, the
district court approved a stipulation filed by the plaintiffs and the issuers
which terminated the proposed settlement.  On August 14, 2007, the
plaintiffs filed amended complaints in the six focus cases. The amended
complaints include a number of changes, such as changes to the definition of the
purported class of investors and the elimination of the individual defendants as
defendants. On September 27, 2007, the plaintiffs filed a motion for class
certification 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 November 14, 2007.  On December
21, 2007, the issuers and the underwriters filed papers opposing plaintiffs’
class certification motion and plaintiffs filed an opposition to defendants’
motions to dismiss.  On January 28, 2008, the issuers and the
underwriters filed reply briefs in further support of their motions to dismiss
the amended complaints.


47





Due to
the inherent uncertainties of litigation, we cannot accurately predict the
ultimate outcome of this matter.  We cannot predict whether Onvia will
be able to renegotiate a settlement that complies with the Second Circuit’s
mandate, nor can we predict the amount of such settlement or whether that amount
would be greater than Onvia’s insurance coverage.  If 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 has waived
service and is in the process of considering what, if any, action to take in
response to this litigation.   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


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 13:
            Employee
      Retirement Plan




In March
2000, Onvia adopted a Savings and Retirement Plan (the “Retirement 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 2005, the Retirement Plan was amended to add a discretionary matching
contribution, made in Onvia common stock, equivalent 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. Matching contributions are made 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 2007, Onvia transferred 15,451 shares from treasury stock into the
Retirement Plan to match 2006 employee contributions and in February 2008, Onvia
transferred 8,837 shares from treasury stock into the Retirement Plan to match
2007 employee contributions.  The Company recorded $58,864 and $94,051
in non-cash stock-based compensation in 2007 and 2006, respectively, related to
this match.




Note 14:
            Stockholders’
      Equity




Authorized
shares


At
December 31, 2007, 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, 2007 and 2006, 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, 2007, 2006 or 2005. 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


48


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 15:
            Supplemental
      Cash Flow Information




Onvia
paid approximately $16,000 in interest expense on capital leases during the year
ended December 31, 2007.  There was no cash paid for interest or
income taxes in the years ended December 31, 2006 and 2005.







Selected
Quarterly Financial Information




The
following tables summarize the quarterly financial data for the years ended
December 31, 2007 and 2006:


Three
      Months EndedMarch
      31,
            
            
            June
      30,
            
            
            September
      30,
            
            
            December
      31,2007
            
            
            2007
            
            
            2007
            
            
            2007(unaudited)(in
      thousands, except per share amounts)Historical
      Condensed Consolidated Statements of Operations and Comprehensive (Loss) /
      Income 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




Three
      Months EndedMarch
      31,
              
              
              June
      30,
              
              
              September
      30,
              
              
              December
      31,2006
              
              
              2006
              
              
              2006
              
              
              2006(unaudited)(in
      thousands, except per share amounts)Historical
      Condensed Consolidated Statements of Operations and Comprehensive Loss
      Data:Revenue
              
              $
              3,889
              
              
              $
              4,060
              
              
              $
              4,265
              
              
              $
              4,525Gross
      margin
              
              
              2,958
              
              
              
              3,192
              
              
              
              3,453
              
              
              
              3,741Noncash
      stock-based compensation
              
              
              336
              
              
              
              319
              
              
              
              300
              
              
              
              303Idle
      lease charges (1)
              
              
              -
              
              
              
              -
              
              
              
              (230
              )
              
              
              163Total
      operating expenses
              
              
              5,268
              
              
              
              4,975
              
              
              
              4,555
              
              
              
              5,042Loss
      from operations
              
              
              (2,310
              )
              
              
              (1,783
              )
              
              
              (1,102
              )
              
              
              (1,301
              )Net
      loss
              
              $
              (2,099
              )
              
              $
              (1,538
              )
              
              $
              (849
              )
              
              $
              (1,058
              )Unrealized
      gain/(loss) on available-for-sale investments
              
              
              -
              
              
              
              2
              
              
              
              19
              
              
              
              (4
              )Comprehensive
      loss
              
              $
              (2,099
              )
              
              $
              (1,536
              )
              
              $
              (830
              )
              
              $
              (1,061
              )Basic
      and diluted net loss per common share
              
              $
              (0.27
              )
              
              $
              (0.20
              )
              
              $
              (0.11
              )
              
              $
              (0.13
              )Basic
      and diluted weighted average shares outstanding
              
              
              7,852
              
              
              
              7,884
              
              
              
              7,898
              
              
              
              7,918


(1)
            Refer
      to the discussion in Note 11 for additional information on idle lease
      charges.




49


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




None.







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 Accounting Officer have concluded
that the Company’s disclosure controls and procedures, as defined in Exchange
Act 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
Exchange Act Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, as
amended.  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.





The
Company’s management, under the supervision of and with the participation of the
Chief Executive Officer and the Chief Accounting Officer, assessed the
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2007 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, 2007.





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, 2007 that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


50




ITEM 9B.
            OTHER
      INFORMATION




None.




51


PART
III






ITEM 10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE




Directors
of the Registrant





We have a
classified Board of Directors of seven members consisting of three Class I
directors, two Class II directors, and two Class III directors who will serve
until the annual meetings of stockholders to be held in 2010, 2008, and 2009
respectively, and until their respective successors are duly elected and
qualified.  At each annual meeting of stockholders, directors are
elected for a term of three years to succeed those directors whose terms expire
at the annual meeting dates.  Any additional directors resulting from
an increase in the number of directors are distributed among the three classes
so that, as nearly as possible, each class consists of an equal number of
directors.





The
directors of the Company are as follows:





Name
              Age
              PositionJeffrey
      C. Ballowe
              52
              Class
      III DirectorJames
      L. Brill
              56
              Class
      I Director and Chairman of the Audit CommitteeRobert
      G. Brown
              61
              Class
      III Director and Lead DirectorRoger
      L. Feldman
              46
              Class
      II Director and Chairman of the Nominating and Governance
      CommitteeMichael
      D. Pickett
              60
              Class
      II Director, Chairman of the Board, Chief Executive Officer and
      PresidentD.
      Van Skilling
              74
              Class
      I Director and Chairman of the Compensation CommitteeSteven
      D. Smith
              49
              Class
      I Director





Jeffrey C. Ballowe has served
as a director of the Company since December 1999. Before leaving Ziff Davis at
the end of 1997, Mr. Ballowe led the launches of five magazines, ZDNet on
the Web, ZDTV (became TechTV), and the initial ZD/Softbank investments in
Yahoo!, Inc. Mr. Ballowe is the co-founder and past president of the
not-for-profit Electronic Literature Organization and a former member of the
board of trustees of Lawrence University.





James L. Brill has served as
a director of the Company since March 2004. Since January 1, 2007, he has
served as Senior Vice President of Finance and Chief Financial Officer of On
Assignment, Inc., a staffing agency for science and healthcare professionals.
From July 1999 to December 2006, he served as Vice President of Finance and
Chief Financial Officer of Diagnostic Products Corporation, a medical
diagnostics manufacturer. From August 1998 to June 1999, Mr. Brill served
as Chief Financial Officer of Jafra Cosmetics International, a cosmetics
manufacturer, and Vice President of Finance and Administration and Chief
Financial Officer of Vertel Corporation from 1996 to 1998.





Robert G. Brown has served as
a director of the Company since November 2004 and the lead director since
October 2005.  Mr. Brown is currently President of Brightwood
Advisors, a private company providing business consulting to technology
companies and investors. Prior to Brightwood Advisors, Mr. Brown was Group
President with Harte-Hanks, a provider of direct marketing services, and
President and CEO of ZD Market Intelligence, a division of Ziff Davis,
Inc.





Roger L. Feldman has served
as a director of the Company since March 2004. Mr. Feldman is a principal
of West Creek Capital, an investment firm he co-founded in 1992. Prior to
forming West Creek Capital, Mr. Feldman was an investment banker and an
attorney. He currently serves on the boards of directors of Capital Senior
Living Corp., ACME Communications, Inc., Kapstone Paper and Packaging, and CMS
Bancorp, Inc.





Michael D. Pickett has served
as a director of the Company since February 1999, as 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
Officer 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.





D. Van Skilling has served as
a director of the Company since November 2004. He has been President of Skilling
Enterprises since March 1999. He retired in April 1999 as Chairman and CEO of
Experian Information Systems Inc.,


52


positions
he held since Experian was formed in 1996. Previously he was employed by TRW,
Inc. for twenty-seven years and was Executive Vice President from 1989 to 1996.
Mr. Skilling currently serves on the boards of directors of First American
Corporation, First Advantage Corporation, and The American Business Bank, and is
Chairman of the Board of Trustees of Colorado College.





Steven D. Smith has served as
a director of the Company since January 2000. Since December 2004,
Mr. Smith has served as the Senior Managing Director of Ritchie Capital
Management, a private equity investment company. From March 1997 to April 2003,
Mr. Smith served as Managing Director of GE Equity, a private equity
investment company and a subsidiary of GE Capital. From August 1990 to February
1997, Mr. Smith served in a variety of positions at GE Capital, most
recently as Managing Director, Ventures.





Executive
Officers of the Registrant





The
executive officers of the Company are as follows:





Name
              Age
              PositionIrvine
      N. Alpert
              56
              Executive
      Vice PresidentMichael
      S. Balsam
              40
              Vice
      President of Products and ServicesEric
      T. Gillespie
              39
              Chief
      Information OfficerMichael
      D. Pickett
              60
              Chief
      Executive Officer, President and Chairman of the BoardMichael
      J. Tannourji
              46
              Senior
      Vice President of SalesCameron
      S. Way
              36
              Chief
      Accounting Officer





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.





Michael S. Balsam has served
as Vice President of Products and Services of the Company since January 2005.
Prior to becoming Vice President, Mr. Balsam served 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.





Eric T. Gillespie has served
as Chief Information Officer of the Company since June 2007. Prior to becoming
Chief Information Officer of the Company, Mr. Gillespie served as Executive Vice
President and Chief Operating Officer of IPIQ, 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 D. Pickett’s
background is described above under the Directors of the Registrant
caption.





Michael J. Tannourji has
served as Senior Vice President of Sales of the Company since November
2007.  From May 2005 to September 2007, Mr. Tannourji served as Vice
President National Sales & Service with Experian, Inc., a global information
services company.  From September 1999 to October 2004, Mr. Tannourji
served as Vice President/Leader Vertical Markets of Dun & Bradstreet, a
global information services company.





Cameron S. Way has served as
Chief Accounting Officer of the Company since January
2003.  Mr. Way served as 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.





Section
16(a) Beneficial Ownership Reporting Compliance





Section 16(a)
of the Securities Exchange Act of 1934 requires the Company’s directors, its
executive officers, and persons who beneficially own more than 10% of its common
stock to file initial reports of beneficial ownership and reports of changes in
beneficial ownership of Onvia’s common stock with the SEC. These individuals are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports that they file.


53





To the
Company’s knowledge, based solely on its review of the copies of such reports
furnished to the Company and written representations from certain reporting
persons that no other reports were required, the Company believes that during
2007 all reporting persons complied with all applicable filing requirements,
except with respect to Michael D. Pickett.  A Form 5 was filed on
February 7, 2008 reporting an acquisition of common stock by Mr. Pickett on
November 29, 2005.





Code
of Ethics





The
Company adopted a code of ethics applicable to its Chief Executive Officer,
Chief Accounting Officer, Controller and other finance leaders, which is a “code
of ethics” as defined by applicable rules of the SEC. 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 SEC.





Director
Nominations by Stockholders





There
have been no material changes to the procedures by which security holders may
recommend nominees to the registrant’s board of directors in the last twelve
months.





Audit
Committee





Onvia has
a separately designated audit committee operating under a written charter
adopted by the Board of Directors in March 2004, which is available on the
Company’s website at www.onvia.com.  The
audit committee was comprised of the following members as of December 31, 2007:
James L. Brill, Robert G. Brown, and Steven D. Smith, each of whom is an
independent director under the rules of the NASDAQ Stock Market, with Mr. Brill
serving as the chairperson. Mr. Brill meets the Audit Committee Financial Expert
criteria as such term is defined in Item 407(d) of Regulation S-K. All other
members of the Audit Committee are financially literate and are financially
sophisticated, as required by the rules of the SEC and the NASDAQ Stock Market,
based on their professional experiences. The Audit Committee retains the
Company’s independent auditors, reviews their independence, reviews and approves
the planned scope of Onvia’s annual audit, reviews and approves any fee
arrangements with the Company’s auditors, oversees their work, reviews and
pre-approves, as appropriate, any non-audit services that they may perform,
reviews the adequacy of accounting and financial controls, reviews the Company’s
critical accounting policies, and reviews and approves any related person
transactions.







ITEM 11.
            EXECUTIVE
      COMPENSATION




Compensation
Committee Report





The
Compensation Committee of the Board has reviewed and discussed the following
Compensation Discussion and Analysis section of this Report with the Company's
management and, based on such review and discussions, the Committee recommended
to the Board that the Compensation Discussion and Analysis be included in this
Report for the fiscal year ended December 31, 2007.





Compensation
Committee





D. Van
Skilling, Chair


Jeffrey
C. Ballowe


Roger L.
Feldman








Compensation
Discussion and Analysis





The
Compensation Committee, which is comprised of Mr. Ballowe, Mr. Feldman and Mr.
Skilling, each of whom is an independent director, is responsible for
establishing and monitoring our general compensation policies and compensation
plans, as well as the specific compensation levels for executive officers,
including our Chief Executive Officer. The Compensation Committee reviews and
establishes annual base salary levels, annual cash bonus opportunity levels, and
long-term incentive opportunities for each Named Executive
Officer.


54





General
Compensation Philosophy


Adopted
by the Board of Directors, our compensation philosophy is designed to attract
and retain well-qualified executive talent, to tie annual and long-term cash and
stock incentives to achievement of measurable corporate and individual
performance objectives, and to align executives’ incentives with stockholder
value creation. To achieve these objectives, the Compensation Committee
implements and maintains compensation plans that tie a significant portion of an
executive’s overall compensation to our Company’s financial performance and
common stock price. Overall, the total compensation opportunity is intended to
create an executive compensation program that is set competitively compared to
public companies of our size and industry, analyzed by our Vice President of
Human Resources and our Compensation Committee using independent, national
survey data. Each executive officer’s compensation package is generally
comprised of four elements: (i) base salary, which reflects an individual’s
qualifications, scope of responsibilities, experience level, expertise,
performance, and impact on Company results; (ii) cash-based annual
incentive compensation tied to personal achievement and overall Company success;
(iii) long-term incentives, which consist of stock options and are designed
to strengthen the mutuality of interests between the executive officers and our
stockholders; and (iv) other compensation programs that our executives
participate in along with all of our employees, including a qualified 401(k)
plan and the ESPP. The Compensation Committee regularly reviews and establishes
base salaries, annual cash bonus opportunity levels, and long-term incentive
opportunities for each executive officer. The executive officers were not
present during, and did not participate in, deliberations or decisions involving
their own compensation during 2007.





The
summary below describes in more detail the factors that the Compensation
Committee considers in establishing each of the four primary components of the
compensation package provided to the Named Executive Officers.





While an
executive officer does not play a role in setting his or her own compensation,
our Chief Executive Officer does make recommendations to the Compensation
Committee concerning stock option grants, bonus plans, and individual pay
increases tied to the performance of other executive officers.





Base
Salary


The level
of base salary is established primarily on the basis of an executive’s
qualifications and relevant experience, the scope of his or her
responsibilities, the strategic goals that he or she manages, the compensation
levels of executive officers at companies of similar revenue and employee size
in the ecommerce and technology industries and in the Seattle marketplace, the
relationship between the executive’s performance and the Company’s results, and
market rates of compensation required to retain qualified management. Generally,
we believe that executive base salaries should be competitive with salaries of
comparable companies. Our Vice President of Human Resources used independent,
national salary survey data to calibrate competitive salaries for our executive
officers. The Compensation Committee reviews the base salary of each executive
annually and may adjust base salary to take into account the individual’s
performance, any changes in responsibility, and to maintain a competitive salary
levels. Company performance does not play a significant role in the
determination of base salary. The Compensation Committee reviewed each
executive’s base salary in December 2007 in connection with setting 2008 base
salary levels.





Cash-Based
Incentive Compensation


At Onvia,
cash-based incentive compensation takes two forms: sales incentives or
commissions for our sales and product executives and a management incentive
plan.  Onvia’s executives who have sales responsibilities can earn
commissions tied to specific sales results. Sales incentive commissions are
intended to reward individual performance that will significantly impact the
Company’s overall performance. The sales incentive levels are market driven and
reflect what other companies of Onvia’s size within Onvia’s industry are doing
based on the assessments of market practice by our Vice President of Human
Resources. Messrs. Alpert, Balsam and Noble earned sales incentive
compensation in 2007 and Messrs. Alpert and Balsam are on sales commission plans
for 2008. The Compensation Committee reviewed the sales incentive programs of
each sales and product executive in January 2008 and adjusted sales incentive
goals as well as targeted incentive payouts for performance.





Onvia’s
2007 Management Incentive Plan allowed for a target bonus award of 11% to 33% of
base salary for participating executive officers. Messrs. Way, Alpert,
Balsam, Gillespie, Rowley and Noble were participants in the 2007 Management
Incentive Plan. Mr. Pickett was not a participant in the 2007 Management
Incentive Plan because Mr. Pickett, as Chief Executive Officer, was
evaluated separately by the Compensation Committee. The objectives of the 2007
Management Incentive Plan were to achieve certain EBITDA goals and annual
bookings under the 2007 budget plan as well as achieve positive cash flow in
2007. Since these targets were not met, no bonuses were paid out under the 2007
Management Incentive Plan. However, the Board approved a one-time bonus of
$5,000 for each of our non-sales executives (since sales executives received
commissions under their own commission plans) in January 2008 to show the
Board’s appreciation of the executives’ work and contributions in
2007.


55





In March
2008, the Compensation Committee established a new management incentive plan,
payable in early 2009, if the Company achieves predetermined targets based on
annual bookings growth, operating cash flow, and net income metrics. All Named
Executive Officers, except for Mr. Pickett, are participants. The
Compensation Committee did not include Mr. Pickett in the 2008 Management
Incentive Plan and has not established a separate bonus plan for
Mr. Pickett. The Compensation Committee believes that the options granted
to Mr. Pickett in 2004 continue to provide sufficient incentives to
Mr. Pickett into 2008.  The 2008 Management Incentive Plan allows
for a target bonus award of 33% of base salary for Messrs. Way, Balsam and
Gillespie if, and only if, all predetermined targets are achieved. The 2008
Management Incentive Plan also allows for a target bonus award of $25,000 for
Mr. Alpert if all predetermined targets are achieved.  The 2008
Management Incentive Plan does not allow for awards beyond target.





The
Compensation Committee established the targets based on annual bookings growth,
operating cash flow, and net income metrics for the 2008 Management Incentive
Plan for three reasons. First and most important, these targets track corporate
performance that most reflect stockholder interests. Second, the targets drive
and reward unified performance across the executive team. Third, the targets
focus the Company on building for long-term, profitable growth. The
participating executive officers earn bonuses under the 2008 Management
Incentive Plan only when all targets have been reached.





Long-Term
Incentive Compensation


We
believe the grant of long-term stock options provides executives and other key
employees with an incentive to maximize long-term stockholder value. Stock
option awards are designed to give the recipient a significant equity stake in
the Company and thereby closely align his or her interests with those of our
stockholders. Factors considered in making such awards include the individual’s
position, his or her performance and responsibilities, market comparisons based
on independent salary survey data, and internal comparisons among our executive
officers. The Compensation Committee also takes into consideration the number of
stock options that an executive officer already holds. Long-term stock options
are not granted annually to our executive officers. The Compensation Committee
is free to consider other factors in determining the size of the option grant
made to each executive officer where it determines that the circumstances
warrant alternative treatment.





Each
option grant allows the executive officer to acquire shares of common stock at a
fixed price per share (the fair market value on the grant date or above) over a
specified period of time (up to 10 years). The options typically vest in equal
periodic installments over a four or five year period, contingent upon the
executive officer’s continued employment with Onvia. The majority of stock
options granted in the last few years have had a five-year vesting period (but
never less than a four-year vesting period), with the exercise price set higher
than the fair market value of the stock on the date of
grant.  Typically, when stock options are granted to an executive
officer, one-fifth of the options have an exercise price set at the fair market
value on the grant date, the second one-fifth of the options have an exercise
price set at $1.00 above the fair market value, the third one-fifth of the
options have an exercise price set at $2.00 above the fair market value, the
fourth one-fifth is set at $3.00 above the fair market value, and the last
one-fifth is set at $4.00 above the fair market value. The Compensation
Committee, as well as our Board, believes that premium-priced stock options are
critical to aligning the interests of our executive officers with stockholders
because premium-priced stock options benefit our executive officers only when
stockholder value increases first. The granting of premium-priced stock options
also reflects the Company’s performance-driven culture and its priority of
increasing stockholder value.





With the
exception of Mr. Gillespie and Mr. Balsam, no stock options were granted in 2007
to our Named Executive Officers because stock option grants were not necessary
to keep total compensation competitive for our Named Executive
Officers.  Mr. Gillespie received a new-hire stock option grant in
connection with his employment by the Company, and Mr. Balsam received a stock
option grant for his performance developing new products.





Other
Compensation Programs


Onvia has
a Savings and Retirement Plan (the “Retirement Plan”). The Retirement Plan is a
qualified salary deferral 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
2005, the Retirement Plan was amended to provide a discretionary matching
contribution, made in the form of Onvia common stock, equal to 25% of every
dollar up to 6% of all eligible employee contributions. The purpose of the
Company’s matching contribution into the Retirement Plan is to encourage
employees to participate in their own retirement savings and to provide another
competitive recruiting tool to attract and retain employees.  The
matching contributions are subject to a four year vesting schedule, with vesting
measured from the employee’s date of hire. The matching contributions are made
in the first quarter following each Retirement Plan year, and employees must be
employed on the last day of the Retirement Plan year to be eligible to
receive


56


the
matching contribution. In February 2008, all of our executive officers, along
with other employees who made contributions into the Retirement Plan, received
matching contributions for the 2007 Plan year.





Effective
May 2000, we adopted the 2000 Employee Stock Purchase Plan (the “ESPP”), which
allows an eligible employee to purchase shares of 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. An
eligible employee may purchase up to 600 shares per year. All of our Named
Executive Officers, except for Mr. Pickett, participated in the ESPP in
2007.





Onvia
does not grant stock awards and does not have any pension plans or any
nonqualified deferred compensation plans.





Compensation
Committee’s Processes and Procedures for Consideration and Determination of
Executive Compensation


The
Compensation Committee has authority to administer the 1999 Plan, the 2000
Directors’ Stock Option Plan, the ESPP and the 2008 Management Incentive Plan,
and make policy recommendations from time to time with respect to our benefit
plans. The Compensation Committee also oversees all of our executive
compensation policies and decisions. In particular, the Committee exercises all
power and authority of the Board in the administration and interpretation of our
benefit plans, including establishing guidelines, selecting participants in the
plans, approving grants and awards, and exercising such other power and
authority as is required and permitted under the plans. The Compensation
Committee also reviews and approves executive officer compensation, including,
as applicable, salary, bonus and incentive compensation levels, equity
compensation (including awards to induce employment), severance arrangements,
change-in-control agreements, special or supplemental benefits and other forms
of executive officer compensation. The Committee periodically reviews regional
and industry-wide compensation practices and trends to assess the adequacy and
competitiveness of our compensation programs. The Committee’s responsibilities
are reflected in its charter, which is reviewed periodically by the Committee,
and the Committee recommends any proposed changes to the Board. The Compensation
Committee's charter is available on our website at www.onvia.com.  The Committee’s
membership is determined annually by the full Board and includes only
independent directors. The Committee meets as often as it deems appropriate, but
not less frequently than annually.




Michael
D. Pickett has served as our Chief Executive Officer since April 2001. His base
salary for the fiscal year ended December 31, 2007 was $250,000. No other
compensation, bonus, commission, or stipend was paid to Mr. Pickett during
2007 because the Compensation Committee believed that the 600,000 stock options
granted to Mr. Pickett on November 29, 2004 provided a competitive
compensation level as well as aligning his interests with those of our
stockholders.





With
respect to Mr. Pickett, the Compensation Committee weighed: (i) the
factors discussed above in “Base Salary,” “Cash-Based Incentive Compensation,”
and “Long-Term Incentive Compensation,” as well as his previous experience as
chairman, president, and chief executive officer of a publicly held company;
(ii) the compensation levels at companies that compete with the Company for
business and executive talent; and (iii) the Company’s performance, in
establishing the amount of Mr. Pickett’s base salary, bonus, and stock
option grant.





The
Compensation Committee has not delegated any authority to make compensation
decisions to any other persons. The Compensation Committee only makes
recommendations about stock option grants to the Board of Directors, who makes
the final decision to grant stock options.





Role
of Executive Officers in Compensation Process


In
addition to reviewing executive officers’ compensation against a group of
comparable companies, the Compensation Committee also solicits appropriate input
from our Chief Executive Officer and Vice President of Human Resources regarding
base salaries, cash incentives and equity grants for our executive officers.
Moreover, only our Chief Executive Officer and Vice President of Human Resources
have a role in determining or recommending the amount and/or form of
employee-level director compensation.





External
Advisors


The
Compensation Committee has the authority to engage the services of outside
advisers and purchase independent salary surveys to assist the Committee in
fulfilling its duties. The Committee did not engage an outside advisor in 2007;
however, the Committee reviewed independent national salary survey data to help
the Committee assess the Company’s current executive compensation practices,
including relative to a group of similar-sized companies within our
industry.  The Committee used this information to help formulate
executive compensation levels for the 2008 fiscal year.  In March
2008, the Compensation Committee engaged an independent compensation consultant
to assist the Committee in the assessment of the competitiveness of the
Company’s executive and director compensation programs compared to its
peers.


57





Deductibility
of Executive Compensation


Under
Section 162(m) of the Internal Revenue Code, the Company’s deduction for certain
compensation paid to Named Executive Officers is subject to an annual limit of
$1 million per employee, unless it is deferred or considered
performance-based.  As the cash compensation paid by the Company to
each of its executive officers is expected to be below $1 million and the
Compensation Committee believes that options granted under the 1999 Plan to such
officers will qualify as performance-based, the Compensation Committee believes
that Section 162(m) will not affect the tax deductions available to the
Company with respect to the compensation of its executive officers. It is the
Compensation Committee’s policy to qualify, to the extent reasonable, its
executive officers’ compensation for deductibility under applicable tax law.
However, the Company may from time to time pay compensation to its executive
officers that may not be deductible.





Timing
of Awards


In making
stock option grants under our option plans, our Compensation Committee has not
timed the award of any stock option to coincide with the release of favorable or
unfavorable information about us. The Compensation Committee has no intention of
timing the award of stock options or other equity-based compensation to coincide
with the release of favorable or unfavorable information about us in the
future.





Compensation
Committee Interlocks and Insider Participation





The
Compensation Committee during 2007 was comprised of Mr. Ballowe,
Mr. Feldman, and Mr. Skilling, each of whom is an independent
director. No member of the Compensation Committee or executive officer of the
Company has, or during 2007 had, a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.








58


Executive
Compensation





Summary
Compensation Table


The
following table sets forth the compensation paid to or earned by: (a) our
President and Chief Executive Officer; (b) our Chief Accounting Officer; and (c)
our three other most highly compensated executive officers in
2007.  It also shows compensation for two additional individuals who
are no longer executives of the Company, but would otherwise have qualified for
inclusion in the table because of their total compensation during 2007
(together, the “Named Executive Officers”).





Name and Principal Position
              Year
              
              Salary
                ($)
              
              
              Bonus
                ($)
              
              
              Option Awards(1)
                ($)
              
              
              Non-Equity Incentive Plan
      Compensation
                ($)
              
              
              All Other Compensation
                ($)
              
              
              TotalMichael
      D. Pickett (2)
                Chairman,
      Chief Executive Officer and President
              2007
              
              $
              250,000
              
              
              $
              -
              
              
              $
              283,809
              
              
              $
              -
              
              
              $
              3,375
              
              
              $
              537,1842006
              
              $
              250,000
              
              
              $
              -
              
              
              $
              437,478
              
              
              $
              -
              
              
              $
              3,300
              
              
              $
              690,7782005
              
              $
              250,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              3,150
              
              
              $
              253,150Cameron
      S. Way (3)
                Chief
      Accounting Officer
              2007
              
              $
              136,250
              
              
              $
              5,000
              
              
              $
              16,332
              
              
              $
              -
              
              
              $
              2,044
              
              
              $
              159,6262006
              
              $
              129,090
              
              
              $
              6,111
              
              
              $
              28,759
              
              
              $
              -
              
              
              $
              2,028
              
              
              $
              165,9882005
              
              $
              109,388
              
              
              $
              6,111
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,732
              
              
              $
              117,232Irvine
      N. Alpert (4)
                Executive
      Vice President
              2007
              
              $
              180,000
              
              
              $
              -
              
              
              $
              53,727
              
              
              $
              130,116
              
              
              $
              3,375
              
              
              $
              367,2182006
              
              $
              180,000
              
              
              $
              -
              
              
              $
              88,849
              
              
              $
              191,747
              
              
              $
              3,300
              
              
              $
              463,8962005
              
              $
              180,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              209,031
              
              
              $
              3,150
              
              
              $
              392,181Michael
      S. Balsam (5)
                Vice
      President of Products and Services
              2007
              
              $
              165,000
              
              
              $
              5,000
              
              
              $
              62,535
              
              
              $
              5,381
              
              
              $
              2,556
              
              
              $
              240,4722006
              
              $
              163,179
              
              
              $
              6,944
              
              
              $
              57,788
              
              
              $
              5,269
              
              
              $
              2,631
              
              
              $
              235,8122005
              
              $
              124,369
              
              
              $
              13,887
              
              
              $
              -
              
              
              $
              5,224
              
              
              $
              2,152
              
              
              $
              145,633Eric
      T. Gillespie (6)
                Chief
      Information Officer
              2007
              
              $
              104,423
              
              
              $
              5,000
              
              
              $
              76,870
              
              
              $
              -
              
              
              $
              6,000
              
              
              $
              192,2932006
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -2005
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Peter
      W. Noble (7)
                Former
      Senior Vice President of Sales
              2007
              
              $
              92,692
              
              
              $
              -
              
              
              $
              80,561
              
              
              $
              20,000
              
              
              $
              102,076
              
              
              $
              295,3282006
              
              $
              200,000
              
              
              $
              25,000
              
              
              $
              166,904
              
              
              $
              25,000
              
              
              $
              3,300
              
              
              $
              420,2042005
              
              $
              100,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,042
              
              
              $
              101,042Matthew
      S. Rowley (8)
                Former
      Chief Information Officer
              2007
              
              $
              90,449
              
              
              $
              -
              
              
              $
              30,436
              
              
              $
              -
              
              
              $
              91,338
              
              
              $
              212,2222006
              
              $
              170,000
              
              
              $
              9,444
              
              
              $
              49,252
              
              
              $
              -
              
              
              $
              2,692
              
              
              $
              231,3882005
              
              $
              170,000
              
              
              $
              10,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              2,700
              
              
              $
              182,700




(1)
            Amounts
      in the Option Awards column represent the dollar amount recognized in
      Onvia’s financial statements as non-cash stock-based compensation for the
      fiscal year, excluding the impact of estimated forfeitures.  Refer
      to Note 2 of the Consolidated Financial Statements for a discussion of the
      assumptions used in the valuation of option
  awards.


(2)
            Mr.
      Pickett’s annual base salary as of December 31, 2007 was
      $250,000.  The 401(k) company matching contribution of $3,375
      appears in the All Other Compensation
column.


(3)
            Mr.
      Way’s annual base salary as of December 31, 2007 was
      $145,000.  Onvia’s Board approved a one-time bonus of $5,000 for
      Mr. Way based on his 2007 performance.  This $5,000 bonus was
      not pre-established by the Board.  The 401(k) matching
      contribution of $2,044 appears in the All Other Compensation
      column.


(4)
            Mr.
      Alpert’s annual base salary as of December 31, 2007 was
      $180,000.  Mr. Alpert’s non-equity incentive compensation in
      2007 consists of $130,116 in sales commissions pursuant to his commission
      agreement with Onvia.  The 401(k) matching contribution of
      $3,375 appears in the All Other Compensation
  column.


(5)
            Mr.
      Balsam’s annual base salary as of December 31, 2007 was
      $165,000.  Mr. Balsam’s non-equity incentive compensation in
      2007 consists of $5,381 in sales commissions pursuant to his commission
      agreement with Onvia.  Onvia’s Board approved a one-time bonus
      of $5,000 for Mr. Balsam based on his 2007 performance.  This
      $5,000 bonus was not pre-established by the Board.  The 401(k)
      matching contribution of $2,556 appears in the All Other Compensation
      column.


(6)
            Mr.
      Gillespie’s annual base salary as of December 31, 2007 was
      $180,000.  Onvia’s Board approved a one-time bonus of $5,000 for
      Mr. Gillespie based on his 2007 performance.  This $5,000 bonus
      was not pre-established by the Board.  The $6,000 included in
      the All Other Compensation column represents relocation expenses paid to
      Mr. Gillespie during 2007.


(7)
            Mr.
      Noble’s annual salary as of May 16, 2007, the date of his termination of
      employment with Onvia, was $200,000.  Mr. Noble received
      severance payments totaling $102,076 comprised of $100,000 in base salary
      and $2,076 in medical and dental benefits upon his termination, which
      amounts are included in the All Other Compensation
  column.


59


(8)
            Mr.
      Rowley’s annual salary as of May 31, 2007, the date of his termination of
      employment with Onvia, was $170,000.  Mr. Rowley received
      severance payments totaling $91,338 comprised of $85,000 in base salary
      and $6,338 in medical and dental benefits upon his termination, which
      amounts are included in the All Other Compensation
  column.





Other
Compensatory Arrangements


The Named
Executive Officers participate in medical, dental, life and disability insurance
plans provided to all of our employees.





Grants
of Plan Based Awards


The
following table presents information regarding non-equity incentive awards and
options granted to the Named Executive Officers during fiscal year
2007.  None of the target annual bonuses approved by the Compensation
Committee were earned by the Named Executive Officers during 2007.





Estimated Future Payouts Under Non-Equity
      Incentive Plan AwardsName
              Grant Date
              
              Threshold
                ($)
              
              
              Target
                ($)
              
              
              Maximum
                ($)
              
              
              All Other Option Awards: Number of Securities
      Underlying Options
                (#)
              
              
              Exercise or Base Price of Option
      Awards
                ($/Sh)
              
              
              Grant Date Fair Value of Option
      Awards
                ($)Michael
      D. Pickett
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Cameron
      S. Way (1)
              01/29/2007
              
              
              -
              
              
              $
              47,850
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Irvine
      N. Alpert (2)
              01/29/2007
              
              
              -
              
              
              $
              199,050
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Michael
      S. Balsam (3)
              01/29/2007
              
              
              -
              
              
              $
              61,450
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -01/24/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,000
              
              
              $
              6.10
              
              
              $
              13,48101/24/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,000
              
              
              $
              7.10
              
              
              $
              12,55001/24/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,000
              
              
              $
              8.10
              
              
              $
              11,73501/24/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,000
              
              
              $
              9.10
              
              
              $
              11,01301/24/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,000
              
              
              $
              10.10
              
              
              $
              10,370Eric
      T. Gillespie (4)
              05/11/2007
              
              
              -
              
              
              $
              59,400
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -07/25/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000
              
              
              $
              8.95
              
              
              $
              84,66307/25/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000
              
              
              $
              9.95
              
              
              $
              79,00907/25/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000
              
              
              $
              10.95
              
              
              $
              73,91607/25/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000
              
              
              $
              11.95
              
              
              $
              69,30907/25/2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,000
              
              
              $
              12.95
              
              
              $
              65,129Peter
      W. Noble (5)
              01/29/2007
              
              
              -
              
              
              $
              20,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Matthew
      S. Rowley (6)
              01/29/2007
              
              
              -
              
              
              $
              56,100
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -




(1)
            Mr. Way's target
      non-equity incentive reflects the target annual bonus approved by the
      Compensation Committee on January 29, 2007 for fiscal year
      2007.


(2)
            Mr.
      Alpert's target non-equity incentive includes $179,050 in target annual
      incentives under his sales commission plan for fiscal year 2007, and
      $20,000 for his target annual bonus approved by the Compensation Committee
      on January 29, 2007 for fiscal year
2007.


(3)
            Mr.
      Balsam's target non-equity incentive includes a target annual bonus of
      $54,450 and $7,000 in target annual incentives under his sales incentive
      plan, both of which were approved by the Compensation Committee on January
      29, 2007 for fiscal year 2007.  The closing market price of
      Onvia's common stock on January 24, 2007, the grant date of Mr. Balsam's
      options, was $6.10.  Please refer to the discussion under
      "Long-Term Incentive Compensation" in the Compensation Discussion and
      Analysis section above for a discussion on the Compensation Committee's
      philosophy on granting premium-priced
options.


(4)
            Mr.
      Gillespie’s target non-equity incentive reflects the target annual bonus
      approved in Mr. Gillespie’s offer letter dated May 11, 2007 for fiscal
      year 2007.  This target annual bonus is pursuant to the annual
      bonus approved by the Compensation Committee on January 29,
      2007.


(5)
            Mr.
      Noble’s target non-equity incentive reflects the target annual bonus
      approved by the Compensation Committee on January 29, 2007 for fiscal year
      2007.


(6)
            Mr.
      Rowley’s target non-equity incentive reflects the target annual bonus
      approved by the Compensation Committee on January 29, 2007 for fiscal year
      2007.  Upon Mr. Rowley's termination of employment with Onvia on
      May 31, 2007, and pursuant to his employment agreement with the Company,
      vesting on 4,000 options with an exercise price of $7.50 and 2,000 options
      with an exercise price of $8.17 were accelerated such that the awards were
      fully vested as of his termination date.  The total intrinsic
      value of the accelerated options was $3,760 on the date of
      acceleration.


60


Outstanding
Equity Awards at Fiscal Year End


The
following table presents information regarding the outstanding equity awards
held by each Named Executive Officer at the end of fiscal year
2007.




Name
              
              Number of Securities Underlying Unexercised
      Options
                (#) Exercisable
              
              
              Number of Securities Underlying Unexercised
      Options(1)
                (#) Unexercisable
              
              
              Option Exercise Price
                ($/Share)
              
              Option Expiration DateMichael
      D. Pickett (1)
              
              
              4,000
              
              
              
              -
              
              
              $
              206.10
              
              02/28/2010302,979
              
              
              
              -
              
              
              $
              2.66
              
              08/14/2010370,000
              
              
              
              230,000
              
              
              $
              10.00
              
              11/29/2014Cameron
      S. Way (2)
              
              
              1,134
              
              
              
              -
              
              
              $
              1.35
              
              08/23/2009320
              
              
              
              -
              
              
              $
              21.73
              
              11/01/20104,376
              
              
              
              -
              
              
              $
              1.77
              
              10/16/201122,000
              
              
              
              -
              
              
              $
              2.55
              
              01/31/201318,500
              
              
              
              11,500
              
              
              $
              7.50
              
              11/29/2014Irvine
      N. Alpert (3)
              
              
              15,375
              
              
              
              -
              
              
              $
              1.48
              
              8/31/201116,548
              
              
              
              -
              
              
              $
              1.48
              
              2/22/201230,000
              
              
              
              -
              
              
              $
              2.55
              
              1/31/201361,666
              
              
              
              38,334
              
              
              $
              7.50
              
              11/29/2014Michael
      S. Balsam (4)
              
              
              11,300
              
              
              
              -
              
              
              $
              2.55
              
              1/31/201324,666
              
              
              
              15,334
              
              
              $
              7.50
              
              11/29/201417,500
              
              
              
              12,500
              
              
              $
              8.17
              
              1/26/2015-
              
              
              
              4,000
              
              
              $
              6.10
              
              1/24/2017-
              
              
              
              4,000
              
              
              $
              7.10
              
              1/24/2017-
              
              
              
              4,000
              
              
              $
              8.10
              
              1/24/2017-
              
              
              
              4,000
              
              
              $
              9.10
              
              1/24/2017-
              
              
              
              4,000
              
              
              $
              10.10
              
              1/24/2017Eric
      T. Gillespie (5)
              
              
              -
              
              
              
              20,000
              
              
              $
              8.95
              
              7/25/2017-
              
              
              
              20,000
              
              
              $
              9.95
              
              7/25/2017-
              
              
              
              20,000
              
              
              $
              10.95
              
              7/25/2017-
              
              
              
              20,000
              
              
              $
              11.95
              
              7/25/2017-
              
              
              
              20,000
              
              
              $
              12.95
              
              7/25/2017Peter
      W. Noble
              
              
              -
              
              
              
              -
              
              
              
              -Matthew
      S. Rowley
              
              
              -
              
              
              
              -
              
              
              
              -




(1)
            Mr.
      Pickett’s unexercisable options have a five year vesting schedule, with
      twenty percent vesting upon the first anniversary of the grant date and
      ratable monthly vesting thereafter until fully vested in November
      2009.


(2)
            Mr.
      Way’s unexercisable options have a five year vesting schedule, with twenty
      percent vesting upon the first anniversary of the grant date and ratable
      monthly vesting thereafter until fully vested in November
      2009.


(3)
            Mr.
      Alpert’s unexercisable options have a five year ratable monthly vesting
      schedule and will be fully vested in November
  2009.


(4)
            Mr.
      Balsam’s unexercisable options expiring in November 2014 and January 2015
      have five year ratable monthly vesting schedules and will be fully vested
      in November 2009 and January 2010, respectively.  His
      unexercisable options expiring in January 2017 have a five year vesting
      schedule, with twenty percent vesting upon the first anniversary of the
      grant date and ratable monthly vesting thereafter until fully vested in
      January 2012.  Twenty percent of the options expiring in January
      2017 became exercisable in January
2008.


(5)
            Mr.
      Gillespie’s unexercisable options have a five year vesting schedule, with
      twenty percent vesting upon the first anniversary of the grant date and
      ratable monthly vesting thereafter until fully vested in January
      2011.





61


Option
Exercises


The
following table presents information regarding the value realized by the Named
Executive Officers upon the exercise of stock options.  Onvia does not
currently grant stock awards, so vesting information for stock awards has been
omitted from the table.





Name
              
              Number of Shares Acquired on
      Exercise
                (#)
              
              
              Value Realized on Exercise (1)
                ($)Michael
      D. Pickett
              
              
              -
              
              
              
              -Cameron
      S. Way
              
              
              -
              
              
              
              -Irvine
      N. Alpert
              
              
              -
              
              
              
              -Michael
      S. Balsam
              
              
              1,700
              
              
              $
              9,626Eric
      T. Gillespie
              
              
              -
              
              
              
              -Peter
      W. Noble
              
              
              58,668
              
              
              $
              123,666Matthew
      S. Rowley
              
              
              63,540
              
              
              $
              231,756




(1)
            Value
      realized represents the difference between the market value of the
      exercised options on the exercise date and the exercise price of the
      options.





Pension
Benefits and Non-Qualified Defined Contribution and Other Non-Qualified Deferred
Compensation Plans


Onvia
does not offer any pension plans or any non-qualified deferred compensation
plans. However, Onvia offers a defined contribution plan (401(k)) for all of its
employees pursuant to which it offers a twenty five percent match, made in Onvia
common stock, on employee contributions up to six percent of eligible employee
earnings.





Potential
Payments upon Termination or Change in Control


Each of
our Named Executive Officers is entitled to certain payments and benefits in the
event of a termination of employment or a change in control
transaction.





Mr.
Pickett and the Company entered into an employment agreement in March
2001.  Pursuant to this agreement, upon termination of Mr. Pickett’s
employment by the Company without cause or by Mr. Pickett for good reason, Mr.
Pickett will receive a lump sum payment of $250,000, twelve months of medical
and dental insurance benefits, and accrued and unused personal time off, or
PTO.  Upon a change in control transaction, fifty percent of the
then-unvested options granted under the 1999 Plan to Mr. Pickett shall vest, and
the remaining unvested options shall vest and become exercisable upon
termination of Mr. Pickett’s employment by the Company (or its successor)
without cause or by Mr. Pickett for good reason within twelve months after a
change of control transaction.





Mr.
Alpert and the Company entered into an employment agreement in February
2002.  Pursuant to this agreement, upon termination of Mr. Alpert’s
employment by the Company without cause or by Mr. Alpert for good reason, Mr.
Alpert shall receive six months of base salary, six months of medical and dental
insurance benefits, and six months of accelerated vesting on unvested
options.  Upon a change in control transaction, twenty-five percent of
the then-unvested options granted to Mr. Alpert shall vest, and the remaining
unvested options shall vest and become exercisable upon termination of Mr.
Alpert’s employment by the Company (or its successor) without cause or by Mr.
Alpert for good reason within twelve months after a change of control
transaction.





Mr.
Rowley and the Company entered into an employment agreement in September
2001.  Pursuant to this agreement, upon termination of Mr. Rowley’s
employment with the Company without cause or by Mr. Rowley for good reason, Mr.
Rowley was to receive six months of base salary and benefits, as well as six
months of accelerated vesting of unvested options granted under the 1999
Plan.  Mr. Rowley’s employment with the Company terminated on May 31,
2007 and payments and option acceleration as provided by this agreement were
granted at that time.





In a
separate resolution, Onvia’s Board of Directors approved a severance package for
Mr. Way.  Pursuant to that resolution, upon termination of Mr. Way’s
employment by the Company for other than cause, or by Mr. Way for good reason,
he will receive six months of base salary and accrued and unused
PTO.





For the
other Named Executive Officers, upon termination of his or her employment with
the Company without cause or by the executive for good reason, the executive
shall receive six months of base salary and six months of medical and dental
insurance benefits.  Upon a change in control transaction, twenty five
percent of the then unvested options granted to him or her shall vest and the
remaining unvested options shall vest and become exercisable upon termination of
his or her


62


employment
by the Company (or its successor) without cause or by him or her for good reason
within twelve months after a change in control transaction.





Termination
of employment for “cause” means: (i) any material and willful misconduct, fraud,
or bad faith on the part of the executive in the performance of the executive’s
duties as an employee of Onvia; (ii) the conviction of the executive of, or the
entry of the executive of a plea of guilty or no contest to, any felony; (iii)
the material breach by the executive of any provision in any material agreement
between the executive and Onvia, if such breach is unremediated within 30 days
after the executive receives written notice of such breach; (iv) the failure of
the executive to comply with any lawful order or instruction of Onvia’s Board of
Directors or its Chief Executive Officer within five days after written notice
of such failure; or (v) the executive’s repeated and serious violations of the
published and written rules or policies of Onvia.





Termination
of employment by the executive for “good reason” means: (i) Onvia’s material
breach of the terms of any employment agreement; (ii) the assignment to the
executive of any duties that are substantially inconsistent with or materially
diminish the executive’s position; (iii) a material reduction of the executive’s
salary, or material adverse modifications to the stock options awarded to the
executive, or material reduction in the executive’s total compensation
hereunder; or (iv) a requirement that the executive be based at any office or
location more than fifty miles from the executive’s primary work
location.





Only
terminations of employment by the Company without cause or by the Named
Executive Officer for good reason will trigger the severance benefits described
above and detailed in the table below.





Upon
termination, and as a condition to the receipt of any severance payments or
option acceleration, each Named Executive Officer must sign a release agreement
and is subject to certain non-compete and non-solicitation provisions for one
year from the termination date, as well as certain confidentiality and
non-disparagement obligations, which last indefinitely.





The
following table summarizes the potential payments to the Named Executive
Officers upon termination unrelated to a change of control transaction assuming
that the triggering event took place on December 31, 2007.





Name
              
              Severance Pay
                ($)
              
              
              Medical and Dental Benefits
                ($)
              
              
              Accrued and Unpaid PTO
                ($)
              
              
              Number of Accelerated Stock
      Options
              
              
              Value of Accelerated Stock Options(1)
                ($)Michael
      D. Pickett
              
              $
              250,000
              
              
              $
              3,469
              
              
              $
              28,846
              
              
              
              120,000
              
              
              $
              -Cameron
      S. Way
              
              $
              72,500
              
              
              $
              5,204
              
              
              $
              15,649
              
              
              
              -
              
              
              $
              -Irvine
      N. Alpert
              
              $
              90,000
              
              
              $
              5,204
              
              
              $
              20,770
              
              
              
              9,999
              
              
              $
              10,899Michael
      S. Balsam
              
              $
              82,500
              
              
              $
              5,204
              
              
              $
              19,039
              
              
              
              -
              
              
              $
              -Eric
      T. Gillespie
              
              $
              90,000
              
              
              $
              3,903
              
              
              $
              5,961
              
              
              
              -
              
              
              $
              -Peter
      W. Noble (2)
              
              $
              100,000
              
              
              $
              2,076
              
              
              $
              16,922
              
              
              
              -
              
              
              $
              -Matthew
      S. Rowley (3)
              
              $
              85,000
              
              
              $
              6,338
              
              
              $
              19,615
              
              
              
              6,000
              
              
              $
              3,760




(1)
            Value
      of accelerated stock options represents the difference between the market
      value of Onvia’s common stock of $8.59 on December 31, 2007 and the
      exercise price of the options for those options with exercise prices below
      $8.59.


(2)
            Mr.
      Noble’s employment terminated on May 16, 2007.  He received
      severance payments totaling $102,076, comprised of $100,000 in base salary
      and $2,076 in medical and dental benefits, as well as accrued and unpaid
      PTO in the amount of $16,922 upon his
  termination.


(3)
            Mr.
      Rowley’s employment terminated on May 31, 2007.  He received
      severance payments totaling $91,338, comprised of $85,000 in base salary
      and $6,338 in medical and dental benefits, as well as accrued and unpaid
      PTO in the amount of $19,615 upon his termination.  Mr. Rowley
      also received accelerated vesting on 6,000 stock options upon his
      termination.





63


The
following table summarizes the potential payments to the Named Executive
Officers upon termination related to a change of control transaction assuming
that the triggering event took place on December 31, 2007.





Name
              
              Severance Pay
                ($)
              
              
              Medical and Dental Benefits
                ($)
              
              
              Accrued and Unpaid PTO
                ($)
              
              
              Number of Accelerated Stock
      Options
              
              
              Value of Accelerated Stock Options(1)
                ($)Michael
      D. Pickett
              
              $
              250,000
              
              
              $
              3,469
              
              
              $
              28,846
              
              
              
              230,000
              
              
              $
              -Cameron
      S. Way
              
              $
              72,500
              
              
              $
              5,204
              
              
              $
              15,649
              
              
              
              8,625
              
              
              $
              9,401Irvine
      N. Alpert
              
              $
              90,000
              
              
              $
              5,204
              
              
              $
              20,770
              
              
              
              20,000
              
              
              $
              21,800Michael
      S. Balsam
              
              $
              82,500
              
              
              $
              5,204
              
              
              $
              19,039
              
              
              
              35,876
              
              
              $
              29,883Eric
      T. Gillespie
              
              $
              90,000
              
              
              $
              3,903
              
              
              $
              5,961
              
              
              
              75,000
              
              
              $
              -Peter
      W. Noble
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -Matthew
      S. Rowley
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -




(1)
            Value
      of accelerated stock options represents the difference between the market
      value of Onvia’s common stock of $8.59 on December 31, 2007 and the
      exercise price of the options for those options with exercise prices below
      $8.59.





Director
Compensation





General
Description of Director Compensation


Every
director of the Company receives an initial stock option grant to purchase 4,000
shares of our common stock under our 2000 Directors’ Stock Option Plan upon
becoming a director, vesting over four years with a ten year term and with an
exercise price equal to the fair market value as of the grant date. Each
independent director receives an automatic annual stock option grant to purchase
1,000 shares of our common stock under our 2000 Directors’ Stock Option Plan on
the date of each annual stockholders meeting, vesting 100% in twelve months,
with a ten year term and with the exercise price equal to the fair market value
as of the grant date. At the 2007 Annual Stockholders Meeting, Messrs.. Ballowe,
Smith, Brill, Feldman, Skilling, and Brown each received an option to purchase
1,000 shares of our common stock under our 2000 Directors’ Stock Option
Plan.





In
addition, the Board of Directors has instituted a policy to compensate each
director who is an independent director as follows: (i) $5,000 per quarter
($7,500 per quarter for the lead director) if such director attended every Board
and committee meeting during such quarter or a prorated amount if all meetings
during the requisite quarter were not attended; (ii) a stock option grant to
purchase 18,750 shares of our common stock, vesting over four years with a ten
year term and with an exercise price equal to the fair market value as of the
grant date, under our Amended and Restated 1999 Stock Option Plan, or 1999 Plan,
on the date on which such director first qualified as an independent director,
followed by annual stock option grants to purchase 5,000 shares (10,000 shares
for the lead director) of our common stock, vesting over four years with a ten
year term and with an exercise price equal to the fair market value as of the
grant date, under the 1999 Plan, on each anniversary date of the 18,750 share
grant; and (iii) a stock option grant to purchase 15,000 shares of our common
stock, vesting over five years with a ten year term and with the exercise price
of $2.50 above the closing price as of the grant date, under the 1999 Plan, on
the fifth anniversary date on which a director qualified as an independent
director.  Messrs.. Ballowe, Smith, Brill, Feldman, and Skilling each
received an annual stock option grant to purchase 5,000 shares under the 1999
Plan on their respective anniversary dates on which they qualified as
independent directors. As the lead director, Mr. Brown received an annual stock
option grant to purchase 10,000 shares under the 1999 Plan on his anniversary
date.  Upon a change in control transaction, 25% of the then-unvested
options granted under the 1999 Plan to directors shall vest.





All
directors are reimbursed for out-of-pocket expenses incurred in connection with
activities as directors, including attendance at Board of Directors and
committee meetings.





64


The
following table presents the compensation paid to or earned by Onvia’s directors
in fiscal 2007.  Mr. Pickett is excluded from the below table because,
except for his grant of 4,000 options under the Directors’ Plan in March 2000,
he has not been compensated for his services as a director; his compensation as
CEO and President is fully reflected in the Summary Compensation Table under the
Executive Compensation caption of this Item.





Name
              
              Fees Earned or Paid in Cash
                ($)
              
              
              Option Awards(1)
                ($)
              
              
              Non-Equity Incentive Plan
      Compensation
                ($)
              
              
              All Other Compensation
                ($)
              
              
              Total
                ($)Jeffrey
      C. Ballowe (2)
              
              $
              20,000
              
              
              $
              31,514
              
              
              $
              -
              
              
              $
              10,000
              
              
              $
              61,514James
      L. Brill (3)
              
              $
              20,000
              
              
              $
              27,364
              
              
              $
              -
              
              
              $
              -
              
              
              $
              47,364Robert
      G. Brown (4)
              
              $
              29,000
              
              
              $
              33,690
              
              
              $
              -
              
              
              $
              -
              
              
              $
              62,690Roger
      L. Feldman (5)
              
              $
              19,000
              
              
              $
              27,364
              
              
              $
              -
              
              
              $
              -
              
              
              $
              46,364D.
      Van Skilling (6)
              
              $
              20,000
              
              
              $
              24,857
              
              
              $
              -
              
              
              $
              -
              
              
              $
              44,857Steven
      D. Smith (7)
              
              $
              19,000
              
              
              $
              24,383
              
              
              $
              -
              
              
              $
              -
              
              
              $
              43,383




(1)
            Amounts
      in the Option Awards column represent the dollar amount recognized in
      Onvia’s financial statements as non-cash stock-based compensation for the
      fiscal year, excluding the impact of estimated
  forfeitures.


(2)
            Mr.
      Ballowe received compensation of $20,000, 5,000 stock options under the
      1999 Plan, and 1,000 stock options under the Directors’ Plan for his Board
      and committee service in 2007.  Mr. Ballowe also received
      $10,000 and 2,500 stock options under the 1999 Plan as compensation for
      advisory services provided under an agreement with Onvia.  The
      advisory fees were approved by both the Audit Committee and the Board on
      October 25, 2006.


(3)
            Mr.
      Brill received compensation of $20,000, 5,000 stock options under the 1999
      Plan, and 1,000 stock options under the Directors’ Plan for his Board and
      committee service in 2007.


(4)
            Mr.
      Brown received compensation of $29,000, 10,000 stock options under the
      1999 Plan, and 1,000 stock options under the Directors’ Plan for his role
      as the lead director and his committee service in
  2007.


(5)
            Mr.
      Feldman received compensation of $19,000, 5,000 stock options under the
      1999 Plan, and 1,000 stock options under the Directors’ Plan for his Board
      and committee service in 2007.


(6)
            Mr.
      Skilling received compensation of $20,000, 5,000 stock options under the
      1999 Plan, and 1,000 stock options under the Directors’ Plan for his Board
      and committee service in 2007.


(7)
            Mr.
      Smith received compensation of $19,000, 5,000 stock options under the 1999
      Plan, and 1,000 stock options under the Directors’ Plan for his Board and
      committee service in 2007.





Grant
Date Fair Value of Options Granted


The
following table presents the grant date fair value of options granted to each
director during 2007.  Mr. Pickett is excluded from the below table
because he did not receive any option awards in 2007 and his information is
fully reflected in the Grants of Plan Based Awards table under the Executive
Compensation caption of this Item.





Name
              
              Grant Date Fair Value of Option
      Awards
                ($)Jeffrey
      C. Ballowe
              
              $
              24,988James
      L. Brill
              
              $
              16,859Robert
      G. Brown
              
              $
              35,079Roger
      L. Feldman
              
              $
              16,859D.
      Van Skilling
              
              $
              19,710Steven
      D. Smith
              
              $
              16,859





65


Aggregate
Number of Outstanding Options at Fiscal Year End


The
following table presents the aggregate number of outstanding options held by
each director as of December 31, 2007.  Mr. Pickett is excluded from
the below table because his outstanding options are fully reflected in the
Outstanding Awards at Fiscal Year End table under the Executive Compensation
caption of this Item.  4,000 of Mr. Pickett's outstanding options were
granted to him on March 1, 2000 as director compensation.  His
remaining options were granted for his roles as Chief Executive Officer and
President.





Name
              
              Aggregate Options Outstanding
                (#)Jeffrey
      C. Ballowe
              
              
              38,501James
      L. Brill
              
              
              40,750Robert
      G. Brown
              
              
              50,750Roger
      L. Feldman
              
              
              40,750D.
      Van Skilling
              
              
              40,750Steven
      D. Smith
              
              
              49,750








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




Securities
Authorized for Issuance Under Equity Compensation Plans





Onvia
currently maintains three compensation plans that provide for the issuance of
its common stock to officers, directors, employees, and
consultants.  Onvia also has outstanding warrants issued in 1999 for
subordinated debt, which was paid off in 2002.  The compensation plans
consist of the 1999 Stock Option Plan, or 1999 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 1999 Plan, the Directors’ Plan, the ESPP, and the
warrants as of December 31, 2007.




Plan
      category
            
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            
            Weighted
      average exercise price of outstanding options, warrants and
      rights
            
            
            Number
      of securities remaining available for future issuanceEquity
      compensation plans approved by security holdersAmended
      and Restated 1999 Stock Option Plan
            
            
            1,799,563
            
            
            $
            7.30
            
            
            
            264,4252000
      Directors' Stock Option Plan
            
            
            48,000
            
            
            
            55.38
            
            
            
            6,000Employee
      Stock Purchase Plan
            
            
            -
            
            
            
            N/A
            
            
            
            386,298Warrants
      issued for debt financing
            
            
            49,941
            
            
            
            9.00
            
            
            
            -Total
            
            
            1,897,504
            
            
            $
            8.56
            
            
            
            656,723


66


Security
Ownership of Certain Beneficial Owners and Management





The
following table sets forth, as of March 1, 2008, certain information with
respect to the beneficial ownership of Onvia’s common stock by: (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
its common stock; (ii) each of its directors; (iii) the Named Executive Officers
identified in the 2007 Summary Compensation Table; and (iv) all executive
officers and directors as a group.




Name
      and Address of Beneficial Owner (1)
              
              Number
      of Shares Beneficially Owned (2)
              
              
              Percent
      of Class (3)Asamara,
      LLC (4)
              
              
              1,598,239
              
              
              
              19.45
              %Nadel
      and GussmanJames
      F. AdelsonStephen
      J. Heyman15
      East 5th Street, 32nd FloorTulsa,
      OK 74103Federated
      Investors, Inc. (5)
              
              
              823,539
              
              
              
              10.02
              %Voting
      Shares Irrevocable TrustJohn
      F. DonahueRhodora
      J. DonahueJ.
      Christopher DonahueFederated
      Investors Tower1001
      Liberty AvenuePittsburgh,
      PA 15222-3779Michael
      D. Pickett, Director,
      CEO and President (6)
              
              
              856,825
              
              
              
              9.59
              %509
      Olive Way, Suite 400Seattle,
      WA 98101Diker
      Management, LLC (7)
              
              
              765,493
              
              
              
              9.31
              %Diker
      GP, LLCCharles
      M. DikerMark
      N. Diker745
      Fifth Avenue, Suite 1409New
      York, NY 10151Roger
      Feldman, Director(8)
      (9)
              
              
              705,530
              
              
              
              8.55
              %1919
      Pennsylvania Avenue NW, Suite 725Washington,
      DC 20006Harvey
      Hanerfeld (8)
      (10)
              
              
              676,802
              
              
              
              8.23
              %1919
      Pennsylvania Avenue NW, Suite 725Washington,
      DC 20006Burnham
      Asset Management Corporation (11)
              
              
              518,000
              
              
              
              6.30
              %Burnham
      Securities, Inc.1325
      Avenue of the AmericasNew
      York, NY 10019Irvine
      N. Alpert, Executive
      Vice President (12)
              
              
              137,045
              
              
              
              1.64
              %Jeffrey
      C. Ballowe, Director (13)
              
              
              98,075
              
              
              
              1.19
              %Michael
      S. Balsam, Vice
      President of Products and Services(14)
              
              
              68,550
              
              
              
              *Cameron
      S. Way, Chief Accounting
      Officer(15)
              
              
              54,269
              
              
              
              *James
      Brill, Director(16)
              
              
              46,208
              
              
              
              *Steven
      D. Smith, Director (17)
              
              
              45,000
              
              
              
              *D.
      Van Skilling, Director (18)
              
              
              37,771
              
              
              
              *Robert
      G. Brown, Director (19)
              
              
              37,576
              
              
              
              *Eric
      T. Gillespie, Chief
      Information Officer
              
              
              -
              
              
              
              *All
      directors and officers as a group (12 persons) (20)
              
              
              2,087,848
              
              
              
              22.29
              %





* Less
than 1%


(1)
            
            Except
      as otherwise indicated, the persons or entities named in this table have
      sole voting and investment power with respect to all shares of common
      stock shown as beneficially owned by them, subject to community property
      laws where applicable and to the information in the footnotes to this
      table.


67


(2)
            
            Under
      the rules of the SEC, a person is deemed to be the beneficial owner of
      shares that can be acquired by such person within 60 days upon the
      exercise of options, warrants, or other convertible
      securities.


(3)
            
            Calculated
      on the basis of 8,218,780 shares of common stock outstanding as of March
      1, 2008, provided that any additional shares of common stock that a
      stockholder has the right to acquire within 60 days after March 1, 2008
      are deemed to be outstanding for the purpose of calculating that
      stockholder’s beneficial ownership.


(4)
            
            According
      to Schedule 13D filed on June 17, 2005.  Asamara, LLC has sole
      voting and dispositive power over 1,236,481 shares.  Nadel and
      Gussman Energy, LLC has sole voting and dispositive power over 361,758
      shares.  James F. Adelson and Stephen J. Heyman are managers of
      Asamara, LLC and Nadel and Gussman Energy, LLC.  Mr. Adelson and
      Mr. Heyman are reported to have shared voting and dispositive power over
      1,598,239 shares.


(5)
            
            According
      to Schedule 13G/A filed on February 13, 2008.  Federated
      Investors, Inc. is the parent holding company of Federated Equity
      Management Company of Pennsylvania and Federated Global Investment
      Management Corp., which act as investment advisers to various registered
      investment companies and separate accounts that own shares of Onvia common
      stock. All of the outstanding voting stock of Federated Investors, Inc. is
      held in the Voting Shares Irrevocable Trust for which John F. Donahue,
      Rhodora J. Donahue, and J. Christopher Donahue act as
      trustees.


(6)
            
            Includes
      138,234 shares of common stock, 1,613 shares of common stock held in the
      Onvia Unitized Stock Fund, or Unitized Fund, under the Onvia, Inc. Savings
      and Retirement Plan, or 401(k) Plan, 712,978 shares issuable upon exercise
      of options granted to Mr. Pickett under the 1999 Plan, and 4,000 shares
      issuable upon exercise of options granted to Mr. Pickett under the
      Directors’ Plan, all of which are exercisable within 60 days of March 1,
      2008.


(7)
            
            According
      to Schedule 13G/A filed on February 12, 2008.  Diker GP, LLC, is
      the general partner of Diker Value-Tech Fund, LP, Diker Value Tech QP
      Fund, LP, Diker Micro-Value Fund, LP, Diker Micro-Value QP Fund, LP,
      Diker-Value QP Fund, LP, Diker Micro and Small Cap Fund, LP, and Diker
      M&S Cap Master, Ltd. (collectively, the “Diker Funds”), and
      beneficially owns 699,060 shares.  Diker Management, LLC is the
      investment manager of Diker Funds, and beneficially owns 765,493
      shares.  Charles M. Diker and Mark N. Diker are the managing
      members of Diker GP, LLC and Diker Management, LLC, and beneficially own
      765,493 shares.


(8)
            
            Mr.
      Feldman and Mr. Hanerfeld are the sole managing members of West Creek
      Capital, LLC, which is the investment adviser to West Creek Partners Fund
      L.P., or Partners Fund, which owns 407,502 shares and Cumberland
      Investment Partners LLC, or Cumberland, which owns 247,070 shares
      according to Schedule 13G/A filed on February 12, 2008.  Mr.
      Feldman and Mr. Hanerfeld may be deemed to have the shared power to direct
      the voting and disposition of the shares owned by the Partners Fund and
      Cumberland.


(9)
            
            Mr.
      Feldman’s beneficial ownership includes 407,502 shares owned by the
      Partner’s Fund, 247,070 shares owned by Cumberland, 14,750 shares
      personally owned by Mr. Feldman, 30,208 shares issuable upon exercise of
      options granted to Mr. Feldman under the 1999 Plan, and 6,000 shares
      issuable upon exercise of options granted to Mr. Feldman under the
      Directors’ Plan, all of which are exercisable within 60 days of March 1,
      2008.


(10)
            Mr.
      Hanerfeld’s beneficial ownership includes 407,502 shares owned by the
      Partner’s Fund, 247,070 shares owned by Cumberland, and 22,230 shares
      personally owned by Mr. Hanerfeld.


(11)
            According
      to Schedule 13G filed on January 25, 2008.  Burnham Asset
      Management Corporation serves as the investment manager for Burnham
      Securities, Inc. and has dispositive authority over 518,000 beneficially
      owned shares.  Burnham Securities, Inc. is a registered
      broker-dealer with a number of discretionary accounts with respect to
      which it has dispositive authority over 78,000 beneficially owned
      shares.


(12)
            Includes
      5,177 shares of common stock, 1,613 shares of common stock held in the
      Unitized Fund under the Onvia 401(k) Plan, and 130,255 shares issuable
      upon exercise of options granted to Mr. Alpert under the 1999 Plan, all of
      which are exercisable within 60 days of March 1,
  2008.


(13)
            Includes
      78,699 shares of common stock, 15,376 shares issuable upon exercise of
      options granted under the 1999 Plan, and 4,000 shares issuable upon
      exercise of options granted to Mr. Ballowe under the Directors’ Plan, all
      of which are exercisable within 60 days of March 1,
  2008.


(14)
            Includes
      4,214 shares of common stock, 1,202 shares of common stock held in the
      Unitized Fund under the Onvia 401(k) Plan, and 63,134 shares issuable upon
      exercise of options granted under the 1999 Plan, which are exercisable
      within 60 days of March 1, 2008.


(15)
            Includes
      4,991 shares of common stock, 948 shares of common stock held in the
      Unitized Fund under the Onvia 401(k) Plan, and 48,330 shares issuable upon
      exercise of options granted under the 1999 Plan, which are exercisable
      within 60 days of March 1, 2008.


(16)
            Includes
      10,000 shares of common stock, 30,208 shares issuable upon exercise of
      options granted under the 1999 Plan, and 6,000 shares issuable upon
      exercise of options granted under the Directors’ Plan, all of which are
      exercisable within 60 days of March 1,
2008.


(17)
            Includes
      35,000 shares issuable upon exercise of options granted under the 1999
      Plan and 10,000 shares issuable upon exercise of options granted under the
      Directors’ Plan, all of which are exercisable within 60 days of March 1,
      2008.


68


(18)
            Includes
      11,966 shares of common stock, 20,805 shares issuable upon exercise of
      options granted under the 1999 Plan, and 5,000 shares issuable upon
      exercise of options granted under the Directors’ Plan, all of which are
      exercisable within 60 days of March 1,
2008.


(19)
            Includes
      10,000 shares of common stock, 22,576 shares issuable upon exercise of
      options granted under the 1999 Plan, and 5,000 shares issuable upon
      exercise of options granted under the Directors’ Plan, all of which are
      exercisable within 60 days of March 1,
2008.


(20)
            Includes
      1,148,870 shares of common stock subject to options exercisable within 60
      days of March 1, 2008.







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






Transactions
with Related Persons





In
accordance with Onvia’s Audit Committee charter, the Company’s Audit Committee
is responsible for reviewing and approving the terms and conditions of all
related person transactions.  There were no such reportable
transactions during 2007. Although Onvia has not entered into any financial
transactions with any immediate family member of a director or executive officer
of the Company, if it were to do so, any such material financial transaction
must be approved by its Audit Committee prior to the Company entering into such
transaction.  A report is made to Onvia’s Audit Committee annually
disclosing all related persons that are employed by the Company and related
persons that are employed by other companies that Onvia had a material
relationship with during that year, if any.  Onvia’s Audit Committee
also reviews and approves its annual report and the information contained
herein.







Determination
of Director Independence





After
review and consideration of the applicable legal standards for director
independence, the Board of Directors determined that each of the following
directors is an “independent director” as defined by the Nasdaq Marketplace
Rules:




Jeffrey
C. Ballowe


James L.
Brill


Robert G.
Brown


Roger L.
Feldman


D. Van
Skilling


Steven D.
Smith





These
directors are referred to as “independent directors” in this
Report.  The Board of Directors has also determined that each member
of the three committees of the Board of Directors meets the independence
requirements applicable to those committees prescribed by NASDAQ, the SEC and/or
the Internal Revenue Service.  The Board of Directors has further
determined that Mr. Brill, a member of the Audit Committee, is an “Audit
Committee Financial Expert,” as such term is defined in applicable SEC
rules.




ITEM 14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES




Deloitte
& Touche served as our independent registered public accounting firm in 2007
and 2006.  Audit and audit-related fees aggregated $273,000 and
$229,490 for the years ended December 31, 2007 and 2006, respectively and were
composed of the following:





Audit
Fees





The
aggregate fees billed for the audit of the Company’s annual financial statements
for the fiscal years ended December 31, 2007 and 2006 and for reviews of the
Company’s financial statements included in the Company’s quarterly Reports on
Form 10-Q during those fiscal years were $247,000 and $203,500,
respectively.





Audit-Related
Fees





The
aggregate fees billed for audit related services for the fiscal years ended
December 31, 2007 and 2006 were $0 and $7,340, respectively. These fees related
to services in conjunction with discussions on internal controls over financial
reporting as it pertains to Sarbanes-Oxley Section 404.


69





Tax
Fees





The
aggregate fees billed for tax services for the fiscal years ended December 31,
2007 and 2006 were $26,000 and $18,650, respectively. These fees relate to
various tax compliance and consulting services for the fiscal years ended
December 31, 2007 and 2006.





All
Other Fees





There
were no other fees that were not included above for the fiscal years ended
December 31, 2007 and 2006.





The Audit
Committee’s charter provides that it shall pre-approve all audit and non-audit
services. Our Audit Committee pre-approved all services provided by our auditor
in 2007. The Audit Committee of the Board of Directors has considered the role
of Deloitte & Touche in providing non-audit services to the Company and has
concluded that such services are compatible with Deloitte & Touche’s
independence as our auditors.




70


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
              34Consolidated
      Financial Statements:Balance
      Sheets
              35Statements
      of Operations and Comprehensive Income / (Loss)
              36Statements
      of Cash Flows
              37Statements
      of Changes in Stockholders’ Equity
              38Notes
      to Consolidated Financial Statements
              39




2.
            FINANCIAL
      STATEMENT SCHEDULES





SCHEDULE
II – VALUATION AND QUALIFYING ACCOUNTS





[Missing
Graphic Reference]


Description
                  
                  Balances at
      Beginning of Period
                  
                  
                  Charged to
      Costs and Expenses
                  
                  
                  Deductions(1)
                  
                  
                  Balances at
      End of PeriodAllowance
      for doubtful accountsYear
      Ended December 31, 2005
                  
                  $
                  62,917
                  
                  
                  $
                  27,705
                  
                  
                  $
                  (46,225
                  )
                  
                  $
                  44,397Year
      Ended December 31, 2006
                  
                  
                  44,397
                  
                  
                  
                  42,505
                  
                  
                  
                  (38,745
                  )
                  
                  
                  48,157Year
      Ended December 31, 2007
                  
                  $
                  48,157
                  
                  
                  $
                  38,501
                  
                  
                  $
                  (34,515
                  )
                  
                  $
                  52,143


(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.


71




3.
            EXHIBITS




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*
              Amended
      and Restated 1999 Stock Option Plan (incorporated by reference to Exhibit
      10.1 from the Form 10-K for the year ended December 31, 2005, filed on
      March 31, 2006)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*
              2000
      Employee Stock Purchase Plan (incorporated by reference to the
      Registration Statement on Form S-1 dated December 21, 1999, as amended
      (File No. 333-93273))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*
              Employment
      Agreement with Matthew S. Rowley dated September 24, 2001 (incorporated by
      reference to Exhibit 10.5 to the Report on Form 10-K for the year ended
      December 31, 2001, filed on March 29, 2002)10.9*
              Separation
      Agreement with Matthew S. Rowley dated May 31, 2007 (incorporated by
      reference to Exhibit 10.10 to the Report on Form 10-Q for the period ended
      June 30, 2007, filed on August 13, 2007)10.10*
              Separation
      Agreement with Peter Noble dated May 16, 2007 (incorporated by reference
      to Exhibit 10.11 to the Report on Form 10-Q for the period ended June 30,
      2007, filed on August 13, 2007)10.11
              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)10.12
              Stage
      III Tri-Party Agreement between Onvia, Blume Yale Limited Partnership and
      the Bill and Melinda Gates Foundation, dated July 27, 2007 (incorporated
      by reference to Exhibit 10.13 to the Report on Form 10-Q for the period
      ended September 30, 2007, filed on November 14, 2007)10.13
              Termination
      of Lease Agreement between Onvia and Blume Yale Limited Partnership, dated
      July 27, 2007 (incorporated by reference to Exhibit 10.14 to the Report on
      Form 10-Q for the period ended September 30, 2007, filed on November 14,
      2007)10.14
              Agreement
      between Onvia and the Bill and Melinda Gates Foundation, dated July 31,
      2007 (incorporated by reference to Exhibit 10.15 to the Report on Form
      10-Q for the period ended September 30, 2007, filed on November 14,
      2007)10.15*++
              2007
      Management Incentive Plan23.1++
              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 Accounting 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 Accounting 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





72




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, 2008.




ONVIA,
      INC.By:
            /s/
      Michael D. PickettMichael
      D. PickettChairman
      of the Board, Chief Executive Officer and PresidentBy:
            /s/
      Cameron S. WayCameron
      S. WayChief
      Accounting 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, 2007, 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, 2008/S/    CAMERON
      S. WAY
              Cameron
      S. Way
            Chief
      Accounting Officer
            March
      31, 2008/S/    JEFFREY
      C. BALLOWE
              Jeffrey
      C. Ballowe
            Director
            March
      31, 2008/S/    JAMES
      L. BRILL
              James
      L. Brill
            Director
            March
      31, 2008/S/    ROBERT
      G. BROWN
              Robert
      G. Brown
            Director
            March
      31, 2008/S/    ROGER
      L. FELDMAN
              Roger
      L. Feldman
            Director
            March
      31, 2008/S/    D.
      VAN
      SKILLING
              D.
      Van Skilling
            Director
            March
      31, 2008/S/    STEVEN
      D. SMITH
              Steven
      D. Smith
            Director
            March
      31, 2008


73