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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
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2005oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          
    to   Commission File Number 0-25361
      Onyx Software
    Corporation
 (Exact Name of Registrant as
    Specified in its Charter)
  Washington

91-1629814(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)   1100  112th Avenue N.E., Suite 100,
    Bellevue, Washington
    98004-4504
 (Address of Principal Executive
    Offices)
  (425) 451-8060
 (Registrants Telephone
    Number, Including Area Code)
      Securities Registered Pursuant to Section 12(b) of the
    Act:
 None.
 Securities Registered Pursuant to Section 12(g) of the
    Act:
 Common Stock, $.01 Par Value Per Share
 Preferred Stock Purchase Rights, $.01 Par Value Per
    Share
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K þ
  Rule 12b-2
  Large accelerated
    filer o     Accelerated
    filer þ     Non-accelerated
    filer o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



ONYX
    SOFTWARE CORPORATION
   FORM 10-K
  For the Year Ended December 31, 2005
   INDEX
  PagePART IItem 1.

Business


3Item 1A.

Risk Factors


16Item 2.

Properties


27Item 3.

Legal
    Proceedings


27Item 4.

Submission of
    Matters to a Vote of Security Holders


27PART IIItem 5.

Market for the
    Registrants Common Equity and Related Shareholder
    Matters


27Item 6.

Selected
    Consolidated Financial Data


29Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


30Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


45Item 8.

Consolidated
    Financial Statements and Supplementary Data


46Item 9.

Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


77Item 9A.

Controls and
    Procedures


77Item 9B.

Other
    Information


78PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


78Item 11.

Executive
    Compensation


78Item 12.

Security Ownership
    of Certain Beneficial Owners and Management


78Item 13.

Certain
    Relationships and Related Transactions


78Item 14.

Principal
    Accountant Fees and Services


79PART IVItem 15.

Exhibits and
    Financial Statement Schedules


79Signatures


83EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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PART I    
    information concerning possible or assumed future operating
    results, trends in financial results and business plans,
    including those relating to earnings growth and revenue growth;
    statements about the level of our costs and operating expenses
    relative to our revenues, and about the expected composition of
    our revenues;
    statements about our future capital requirements and the
    sufficiency of our cash, cash equivalents, investments and
    available bank borrowings to meet these requirements;
    information about the potential benefits of our products;
    other statements about our plans, objectives, expectations and
    intentions; and
    other statements that are not historical facts.      ITEM 1.
    BUSINESS  Overview
     3




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98004-4504. Form 10-K, Form 10-Q, Form 8-K,
  Industry
    Background
          e-mail
 4




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Advantages
    of the Onyx Solution
        Strategic Business Improvement
    
    Our solutions are designed to increase both the effectiveness
    and the efficiency of how our customers market, sell and support
    their products or services. Each of our customers has specific
    business objectives for its operating environment, such as
    increased revenues, increased customer satisfaction and loyalty
    or improved margins. Our solutions are designed to be adaptable
    to our customers processes to assist our customers in
    creating operating metrics to achieve their goals and to deliver
    extraordinary customer experiences.Business Alignment
    
    Our solutions align all customer-facing departments around a
    common sales and marketing strategy and around holistic customer
    management processes. Our integrated solutions give
    organizations the ability to manage the entire customer
    lifecycle from end to end, rather than simply automating
    departmental functions. We use a flexible, integrated workflow
    and an integrated data model that, unlike traditional customer
    interaction software, such as sales-force automation software or
    other point solutions, provide a single repository
    of marketing, service and sales information throughout the
    organization. Our technology also provides for linkages and
    workflow of business processes to extend across the
    customer-facing departments into the back office functions of an
    organization, which can reduce cost of integration and increase
    efficiency.Rapid Deployment
    
    From strategy development to technology implementation, our
    solutions are designed to be rapidly deployable throughout the
    enterprise so companies can quickly adapt to rapid changes in
    the business environment and do so cost effectively.Ease of Use
    
    Our solutions are designed to facilitate consistent
    communication and collaboration across the organization through
    clearly defined and customized operating procedures and a suite
    of
    easy-to-use
    interfaces. Interfaces and processes can be tailored by
    audience, device and skill 5




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level. We have been recognized by the industry for this
    advantage by receiving users choice awards for leading
    ease of use.Return on Investment
    
    The total cost of deploying customer management solutions
    includes more than the cost of the software. Our solutions are
    designed to provide rapid and significant results at a
    reasonable total expense, which includes user training, broad
    deployment, design and on-going flexibility to match the
    organizations needs. We believe our solutions offer a
    higher overall return on investment and faster payback than
    competing customer management solutions. Our design philosophy
    takes the entire cost of ownership into account, including
    training, integration with other systems, upgrades and
    maintenance, hardware and other necessary support.Scalability and Flexibility
    
    We designed our software so that it can scale up and down to
    serve the needs of large enterprises, governments and
    medium-sized businesses. Studies sponsored by us and run in
    scalability labs showed our solutions ability to scale to
    57,000 simultaneous users in a real-world testing environment.
    We believe that a customer management solution needs to be able
    to scale down as well so that it can handle the needs of smaller
    divisions or other smaller groups within a large enterprise. Our
    software is flexible, scalable and widely deployable across a
    wide spectrum of business sizes. We currently have solutions
    deployed that range from 25 seats to 5,000 seats.Service-Oriented Architecture
    
    Our software is built on a highly flexible, service-oriented
    architecture that provides users with a comprehensive Internet
    interface for managing customer and partner relationships. We
    designed our technology to provide our customers and partners
    more flexibility for integrating additional applications and
    workflows and for deploying the system across a larger and more
    distributed workforce than we believe would be possible with
    competing architectures.Web Services Components
    
    We have taken advantage of our Internet architecture and its Web
    services components to fully expose data and processes from
    within our application via Web services to make it easier for
    other software applications to access them, even if they are
    written in a different programming language. We believe this
    open and flexible technology approach allows us to address a
    broader array of industry-specific and user-specific needs by
    diversifying the form our software can take. Our software
    utilizes extensible markup language, or XML, making it
    comparatively easy to integrate with other systems.  Strategy
    Exploit Demand for Integrated Customer Applications
    
    We offer companies a single platform for automating interactions
    across their customer facing departments, including a
    companys network of partners and affiliates. A single
    platform becomes more important as businesses are increasingly
    seeking to consolidate legacy databases and systems for greater
    operating efficiency and to gain market share. 6




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Provide Rapidly Deployable and Adaptable Solutions
    
    We designed our solutions to be quickly and efficiently deployed
    in large enterprises. We believe the length of time it takes to
    deploy traditional CRM solutions, as well as the high costs of
    deployment, are unacceptable to growing numbers of
    organizations. Competitive pressures encourage organizations of
    all sizes to adopt information technology solutions that are
    quickly deployed, meet business-critical needs and provide
    interfaces that minimize user training and facilitate
    incremental upgrades, extensions and scalability. We plan to
    continue to design our products to maintain low total cost of
    ownership yet at the same time allow our customers to automate
    their unique and changing business processes.Leverage our Flexible Architecture and Create Robust
    Solutions
    
    Our open and flexible architecture allows us to offer subsets of
    our solutions both through our direct sales force and in
    cooperation with partners to the marketplace. Our partners also
    sometimes offer supersets of our solutions, building upon our
    core application. Highly functional, yet cost-effective,
    industry-specific solutions based on our technology are marketed
    by us and our partners. We believe that our technology is
    attractive to partners who wish to incorporate customer
    management functionality into their offerings and to companies
    who wish to leverage this model to publish specific
    functionality to certain divisions or affiliated businesses
    organizations, such as third-party distributors or brokers for
    that companys products.Maintain High Customer Satisfaction
    
    We plan to maintain our customer satisfaction through
    high-quality products and partners, superior implementation and
    responsive customer service and support.Expand Partnerships
    
    We are actively adding key distribution, integration and
    technology partners with proven expertise and existing customers
    in their respective markets. We believe that expanding the
    breadth of our partnerships will provide us with increased
    access to prospective customers in various geographic and
    vertical markets. We also team with software providers and other
    partners who may integrate specific functional components of our
    solutions and embed them into the workflow of their own
    applications. We are also increasing our focus on integrators
    who include our solutions as part of a comprehensive offering
    tailored to meet an organizations specific requirements,
    often as part of a multi-year managed services program.Expand Internationally
    
    Our products have been localized in more than 10 languages and
    we are compliant with Unicode, an industry-wide standard that
    enables companies to use multilingual text in a single database,
    at all three levels of our architecture. We plan to expand our
    global operations by investing in our sales channels in major
    international markets.Increase Target Market Penetration
    
    We plan to design and deliver additional industry-specific
    functionality as part of our product portfolio to better meet
    the requirements of specific vertical markets. We are focusing
    on large segments within the services industries such as
    financial services, insurance and government. We also plan to
    partner with VARs and, system integrators to provide tailored,
    industry-specific solutions to the marketplace. 7




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Products
    and Services
    Products
  Onyx Customer Management e-Business
  The Onyx
    e-Business
    Engine e-Business e-Business e-Business e-Business
  
    The Universal Interface Frameworkenables enterprises to
    deliver customer data to multiple-user communities through a
    variety of offline and online interfaces, including
    Internet-based thin clients, Outlook-based clients, handheld
    devices and Windows clients.
    The
    e-Business
    Process Technologymanages the flow of information and
    process through all customer-facing departments, including
    marketing, sales, service and contact center organizations. The
    e-Business
    Process Technology is responsible for customer management
    activity, including list management, marketing campaign
    execution,
    e-mail
    marketing, marketing collateral distribution, lead management,
    sales process management, forecasting, quote generation,
    reporting, service automation, knowledge management, incident
    escalation and routing, workflow management, Internet-based
    qualification,
    e-mail
    support, Internet-based lead capture, Internet-based support,
    partner management and other Internet-based and
    non-Internet-based customer management processes.
    The
    e-Business
    Data Centeris an enterprise-wide, customer-centric solution
    for managing all customer-related information. The
    e-Business
    Data Center consists of multiple data storage structures.
    The
    e-Business
    Integration Frameworkconsists of multiple integration
    technologies that are designed to enable customers to link our
    e-Business
    Engine with other systems, including Internet-based content,
    Internet-based applications, legacy enterprise resource planning
    and accounting applications, computer telephony solutions,
    reporting applications, commerce solutions and desktop
    productivity applications.  Onyx Employee Portal
  Onyx Partner Portal
 8




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Onyx Customer Portal
  Onyx Process Management human-to-human system-to-system
  
    The Onyx Process Designerenables users to graphically
    model and implement business processes that can span multiple
    users, systems and applications. These processes can be started
    by an employee user (for example, escalating a sales lead from a
    high-profile prospect entered by a contact center agent), event
    driven (for example, the total assets under management of an
    existing client surpasses a specified threshold) or time driven
    (for example, completion of a required task in another
    enterprise application that is not completed by a specified
    time).
    The Onyx Rules Builderenables non-programmers to
    build and modify business rules that govern key customer
    interactions.
    The Onyx Integration Engineis used in conjunction with
    the Onyx Process Designer to facilitate the integration of other
    application data required for the execution of business
    processes.
    The Onyx Forms Technologyis used in conjunction
    with the Onyx Process Designer to facilitate human interaction
    workflow through the use of sophisticated forms technology.  Onyx Performance Management
  up-to-the-minute
      Professional
    Services
    Consulting
    
    We offer our customers high-quality consulting services directly
    and with our partners. These services include business process
    modeling 9




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and re-engineering, change management, product installation and
    configuration, product migration, systems integration, data
    conversion, custom development, business intelligence design and
    delivery, and project management. Independently, or in
    conjunction with our partners, we work closely with our
    customers to identify their business needs and configure the
    solution to these needs in an efficient, cost-effective manner.Customer Support
    
    We have implemented a comprehensive customer support program to
    assist customers and partners who use and build upon our
    products. The support program includes
    e-mail
    support, on-line support via the Internet and telephone support
    from our worldwide support center. In addition, we offer a
    premium support program that allows our customers to contact our
    support centers around the world seven days a week,
    24 hours a day.Education
    
    We offer a broad range of classroom and on-premise educational
    courses. Classroom-based educational courses cover the
    implementation and administration of our product portfolio,
    including customer management, process management and
    performance management. On-premise education includes
    client-specific end-user training and technical training.      Onyx
    Technology
  Internet-Based
    Architecture
    XML
    Integration Framework
  e-Business
 10




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Enterprise-Class Platform
  e-Business e-Business
    Support for Multiple Platforms.
  n-tiered
    Architecture. out-of-the-box
  Configuration.
  
    Presentation Services Tier.  Our Internet-based
    portal interface can be customized by leveraging our graphical
    administration tools and the inherent openness, extensibility
    and customizability of Internet forms architecture.
    Business Logic Services Tier.  Our
    applications business logic can be customized via a suite
    of graphical administration tools coupled with an open
    programmatic customization framework. The graphical
    administration tools, such as Onyx Process Designer, allow
    customers to easily model business terminology, complex
    processes and workflow and security. However, customers are not
    limited to graphical user interface administration tools; they
    can also use market-available development tools to extend the
    application. Business terminology, rules, workflows and security
    models are inherited by alternative client interfaces.
    Data Services Tier.  Our software application
    includes a generic data access integration framework that can be
    used to manage data residing inside or outside the standard Onyx
    e-Business
    Data Center. By using this service and the forms customization
    framework, we believe that the Onyx
    e-Business
    Engine can manage information that extends beyond merely
    traditional CRM. 11




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Integration With Other Enterprise
    Applications. e-Business e-Business peer-to-peer and/or e-Business
  Store and Forward Synchronization
    Architecture.
  Integrated Data Model.
  Multiple Interface Support. e-Business
  Standards-Based Tools and Components.
  Cross-Platform Interoperability. e-Business
 12




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Customers
    and Markets
    Financial ServicesStewart Information
    Services
    Metavante Corp
    Imperial Al Credit Companies
    Texans Credit Union
    Prudential Retirement Services
    Pacific Investment Mgmt Company LLC
    AIU Insurance Company
    American Life Insurance Japan Branch
    AIG Life Insurance
    Palmer & Cay
    AIG Alico Japan
    Pacific Retail Services Limited
    Toyota Financial Services
    Pacific Retail Services LimitedGovernmentHighlands and Islands Enterprise
    Queensland Department of Child Safety
    Ufi Ltd (University for Industry)
    Lancashire County Council
    London Borough of Greenwich
    Medway Council
    Tourism Tasmania
    State of New York
    OGC Buying Solutions

TechnologyRackspace Managed
    Hosting
    Tyler Technologies
    AgVantis
    CSF
    Konica Minolta Business
    Solutions Europe
    Konica Minolta Business
    Technologies, Inc
    Leica Geosystems AG
    Fundtech CorporationHealth CareUnum Provident
    SCAN Health Plan
    HealthNow, NY
    Gentivia Health ServicesTelecommunications & MediaReed Business Information
    Telecom Malaysia Bhd
    Starhub Cable Vision Ltd
    NTT Communications Corp
    SpectraSite
    CCH Australia Limited

OtherMetron North America
    Hewitt Associates LLC
    Costa Crociere SpA
    Lifeline Systems, Inc
    Adventec- HR
    Chempoint.com
    Hunter Douglas
    Canter Croup
    JF Shea
    The Hong Kong Jockey Club
    AmeriCold Logistics
    Amway Japan Limited
    Starbucks Coffeee Company
    Calor Gas   Sales and
    Marketing
       13




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Research
    and Development
      
    specification and review of business requirements, functional
    requirements, prototypes, technical designs, test plans and
    documentation plans;
    iterative, scheduled quality assurance of code and documentation;
    frequent stabilization of product;
    test automation definition, instrumentation and execution;
    test of functions, components, systems, integration,
    performance, stress and internationalization;
    full product regression testing before beta or general
    availability releases;
    trial deployments in an internal production environment prior to
    release;
    beta releases; and
    general availability release of English and localized products.   14




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Intellectual
    Property and Other Proprietary Rights
        Competition
      
    our potential customers internal information technology
    departments, which may seek to develop systems in-house;
    front-office software application vendors, such as Microsoft
    Corporation, Pivotal Corporation (part of CDC Software), and
    SalesLogix (part of Sage, Inc.);
    large enterprise software vendors, such as Oracle Corporation,
    PeopleSoft, Inc. (acquired by Oracle Corporation) and SAP
    AG; and
    providers of hosted CRM services, such as Salesforce.com.    Employees
   15




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ITEM 1A.
    RISK
    FACTORS  Our
    operating results fluctuate and could fall below expectations of
    investors, resulting in a decrease in our stock price.
    
    general economic conditions, which may affect our
    customers capital investment levels in management
    information systems and the timing of their purchases;
    the loss of any key technical, sales, accounting and finance,
    customer support or management personnel and the timing of any
    new hires;
    budget and spending decisions by our prospective and existing
    customers;
    customers and prospects decisions to defer orders or
    implementations, particularly large orders or implementations,
    from one quarter to the next, or to proceed with
    smaller-than-forecasted
    orders or implementations;
    level of purchases by our existing customers, including
    additional license and maintenance revenues;
    our ability to compete in the highly competitive customer
    management systems market;
    our ability to develop, introduce and market new products and
    product versions on a timely basis;
    rate of market acceptance of our software solutions;
    variability in the mix of our license versus service revenue,
    the mix of our direct versus indirect license revenue and the
    mix of services that we perform versus those performed by
    third-party service providers;
    our ability to successfully expand our operations, particularly
    our direct and indirect sales force and professional services
    organizations, and the amount and timing of expenditures related
    to this expansion;
    our ability to expand our sales pipeline through our marketing
    activities and the expenses associated with these marketing
    activities;
    the success of, the costs associated with, and the financial
    accounting effects of any acquisitions of companies or
    complementary technologies;
    the expense we could incur as a result of an impairment in our
    goodwill;
    the expense we will incur as a result of changes in rules for
    granting equity-based compensation; and
    changes in generally accepted accounting principles in the
    United States and the application of any such changes to the
    presentation of financial results.    
    our sales cycles are lengthy and variable, typically ranging
    between six and twelve months from our initial contact with a
    potential new customer to the signing of a license agreement,
    although the sales cycle varies substantially from customer to
    customer, and occasionally requires substantially more time;
    a substantial portion of our sales are completed at the end of
    the quarter and, as a result, a substantial portion of our
    license revenue is recognized in the last month of a quarter,
    and often in the last weeks or days of a quarter; 16




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
    the contracting process of our sales cycle may take more time
    than we have historically experienced;
    the amount of unfulfilled orders for our products at the
    beginning of a quarter is typically small because our products
    are generally shipped shortly after orders are received; and
    the delay of new product releases can result in a
    customers decision to delay execution of a contract.    We have
    incurred losses in prior periods, and may not be able to
    maintain profitability, which could cause a decrease in our
    stock price.
          If our
    corporate strategy and market positioning is unsuccessful, we
    may not be able to generate revenue and achieve
    profitability.
    If we are
    unable to compete successfully in the highly competitive
    customer management systems market, our business will
    fail.
   17




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The
    business applications software market sector is consolidating,
    which may lead to stronger competitors or create questions in
    the marketplace regarding our status as an independent software
    vendor.
    If we do
    not retain our key employees and management team our ability to
    execute our business strategy will be limited.
   18




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Changes
    in applicable rules regarding equity compensation could require
    modifications to our equity compensation strategy that may
    negatively affect our ability to attract and retain employees
    and adversely affect our operating results.
    We may be
    unable to obtain the funding necessary to support the expansion
    of our business, and any funding we do obtain could dilute our
    shareholders ownership interest in us.
     19




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If we are
    unable to develop and maintain effective long-term relationships
    with our key partners, or if our key partners fail to perform,
    our ability to sell our solution will be limited.
      
    we are unable to develop and maintain effective, long-term
    relationships with existing and potential key partners;
    our existing and potential key partners endorse a product or
    technology other than our solutions;
    we are unable to adequately train a sufficient number of key
    partners; or
    our existing and potential key partners do not have or do not
    devote resources necessary to implement our solutions.  Economic
    and business conditions could adversely affect our revenue
    growth and ability to forecast revenue.
       20




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Our
    business is subject to regulations promulgated under the
    Sarbanes-Oxley Act of 2002 that have resulted in increased
    operating costs and diversion of management attention.
    The
    internal controls implemented under the Sarbanes-Oxley Act of
    2002 may not prevent or detect all material weaknesses or
    significant deficiencies.
  Form 10-K
  We may be
    unable to establish vendor-specific objective evidence of fair
    value or undelivered transaction elements, which could delay our
    ability to recognize software license revenue to later periods
    and thereby adversely affecting our operating results.
  and/or
 21




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An
    unfavorable review of our domestic and international tax returns
    could adversely affect our operating results.
  and/or
  Unauthorized
    or improper actions of our personnel could adversely impact our
    operating results and financial statements.
    Fluctuations
    in support and service revenue could decrease our total revenue
    or decrease our gross margins, which could cause a decrease in
    our stock price.
    Our
    solutions may not achieve significant market
    acceptance.
   22




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If
    potential customers do not accept the Onyx product family, our
    business will fail.
    We may be
    unable to efficiently restructure or expand our sales
    organization, which could harm our ability to expand our
    business.
    If our
    customers cannot successfully implement our products in a timely
    manner, demand for our solutions will be limited.
    Rapid
    changes in technology could render our products obsolete or
    unmarketable, and we may be unable to introduce new products and
    services successfully and in a timely manner.
     23




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If we do
    not expand our international operations and successfully
    overcome the risks inherent in international business
    activities, the growth of our business will be
    limited.
    
    costs of customizing products for foreign countries;
    export and import restrictions, taxes, tariffs and other trade
    barriers;
    the need to comply with multiple, conflicting and changing laws
    and regulations;
    reduced protection of intellectual property rights and increased
    liability exposure; and
    regional economic, cultural and political conditions, including
    the direct and indirect effects of terrorist activity and armed
    conflict in countries in which we do business.      We may
    not realize the expected benefits of future acquisitions and the
    integration of these acquisitions, should they occur, may
    distract our management and disrupt our business.
    
    difficulty and cost in combining the operations, technology and
    personnel of acquired businesses with our operations and
    personnel;
    disruption of our ongoing business and diversion of
    managements time and attention to integrating or
    completing the development or commercialization of any acquired
    technologies;
    impairment of relationships with key customers of acquired
    businesses due to changes in management and ownership of the
    acquired businesses;
    inability to retain key employees of any acquired businesses; 24




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
    the failure of acquired business to meet our expectations with
    respect to legal or financial contingencies and product quality;
    difficulty in maintaining procedures and policies during the
    integration; and
    inability to achieve the anticipated financial goals of the
    acquired or combined businesses.    We may be
    unable to adequately protect our proprietary rights, which may
    limit our ability to compete effectively.
    Intellectual
    property claims and litigation could subject us to significant
    liability for damages and result in invalidation of our
    proprietary rights.
    
    stop or delay selling, incorporating or using products that
    incorporate the challenged intellectual property;
    pay damages;
    enter into licensing or royalty agreements, which may be
    unavailable on acceptable terms; or
    redesign products or services that incorporate infringing
    technology, which we might not be able to do at an acceptable
    price, in a timely fashion or at all.  Our
    products may suffer from defects or errors, which could result
    in loss of revenue, delayed or limited market acceptance of our
    products, increased costs and damage to our
    reputation.
  day-to-day
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You may
    be unable to resell your shares at or above the price at which
    you purchased them, and our stock price may be
    volatile.
    
    significant trading activity by shareholders with large holdings
    in our common stock;
    future announcements concerning us or our competitors;
    actual or anticipated quarterly variations in operating results;
    changes in analysts earnings projections or
    recommendations;
    announcements of technological innovations;
    the introduction of new products;
    changes in product pricing policies by us or our competitors;
    proprietary rights litigation or other litigation; or
    changes in accounting standards that adversely affect our
    revenue and earnings.      Our
    articles of incorporation, bylaws, rights plans and Washington
    law contain provisions that could discourage a
    takeover.
    
    stagger the election of our board members so that only one-third
    of our board is up for reelection at each annual meeting;
    allow our board to issue preferred stock without any vote or
    further action by the shareholders;
    eliminate the right of shareholders to act by written consent
    without a meeting, unless the vote to take the action is
    unanimous;
    eliminate cumulative voting in the election of directors;
    specify a minimum threshold for shareholders to call a special
    meeting;
    specify that directors may be removed only with cause; and 26




---



##### Table of Contents




    specify a supermajority requirement for shareholders to change
    those portions of our articles that contain the provisions
    described above.        ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER
    MATTERS  Market
    Information
   27




---



##### Table of Contents



Price Range ofCommon StockHigh


LowYear Ended December 31,
    2004First Quarter

$
4.83


$
2.98Second Quarter


4.49



3.09Third Quarter


4.12



3.25Fourth Quarter


3.65



3.02Year Ended December 31,
    2005First Quarter

$
3.56


$
2.51Second Quarter


4.04



2.43Third Quarter


4.09



3.45Fourth Quarter


4.30



2.97   Holders
    Dividends
   28




---



##### Table of Contents



ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA    Year Ended
    December 31,2001


2002


2003


2004


2005(In thousands, except per share
    data)Consolidated Statement of
    Operations Data:Revenue:License

$
37,584


$
22,633


$
12,143


$
13,666


$
17,224Support and service


62,116



46,751



46,230



43,968



43,173Total revenue


99,700



69,384



58,373



57,634



60,397Cost of revenue:License


2,006



1,140



848



984



1,579Amortization of acquired technology


751



498



255







1,024Support and service


35,662



20,128



20,711



18,614



17,876Total cost of revenue


38,419



21,766



21,814



19,598



20,479Gross margin


61,281



47,618



36,559



38,036



39,918Operating expenses:Sales and marketing


53,254



27,947



20,629



19,354



19,261Research and development


21,968



14,745



11,838



10,613



9,813General and administrative


14,623



9,449



8,205



8,600



9,956Restructuring and other related
    charges


51,806



8,491



1,422



442



Amortization and impairment of
    goodwill and other acquisition-related intangibles(1)


13,695



836



836



627



Severance charges(4)














996



Stock-based compensation


904



248



70







Total operating expenses


156,250



61,716



43,000



40,632



39,030Income (loss) from operations


(94,969
)


(14,098
)


(6,441
)


(2,596
)


888Other income (expense), net


377



(119
)


78



(340
)


107Change in fair value of
    outstanding warrants










355



513



(2
)Investment losses and impairment


(2,500
)










(403
)


Income (loss) before income taxes


(97,092
)


(14,217
)


(6,008
)


(2,826
)


993Income tax provision (benefit)


(294
)


585



264



(57
)


108Minority interest in loss of
    consolidated subsidiary


(1,283
)


(1,032
)


(118
)


(15
)


(106
)Net income (loss)

$
(95,515
)

$
(13,770
)

$
(6,154
)

$
(2,754
)

$
991Basic and diluted net income
    (loss) per share(2)(3)

$
(9.46
)

$
(1.10
)

$
(0.46
)

$
(0.19
)

$
0.06Shares used in calculation of
    basic net income (loss) per share(2)(3)


10,092



12,481



13,442



14,364



16,725Shares used in calculation of
    diluted net income (loss per share)


10,092



12,481



13,442



14,364



16,846   29




---



##### Table of Contents



December 31,2001


2002


2003


2004


2005(In thousands)Consolidated Balance Sheet
    Data:Cash and cash equivalents

$
15,868


$
17,041


$
10,127


$
14,393


$
21,574Restricted cash






2,238



1,723







Working capital (deficit)


(4,718
)


3,706



4,177



3,199



12,457Total assets


64,511



54,787



41,425



45,556



50,662Long-term obligations, less
    current portion


10,178



2,677



2,496



4,901



2,635Long-term
    obligations  warrants






920



565



52



Shareholders equity


8,135



16,828



16,299



16,737



25,422     (1)
    
    Effective January 1, 2002, we adopted the provisions of
    Statement of Financial Accounting Standards No. 142
    Goodwill and Other Intangible Assets, or
    SFAS 142. Under SFAS 142, goodwill is no longer
    amortized, beginning January 1, 2002. See Note 1 of
    Notes to Consolidated Financial Statements for further
    explanation of the impact of SFAS 142.(2)
    
    See Notes 1 and 12 of Notes to Consolidated Financial
    Statements for an explanation of the method used to calculate
    basic and diluted net loss per share.(3)
    
    On July 23, 2003, our shareholders approved a
    one-for-four
    reverse stock split, which became effective on that date. All
    share and per share amounts in the accompanying consolidated
    financial statements have been adjusted to reflect this reverse
    stock split.(4)
    
    See Note 3 of Notes to Consolidated Financial Statements
    for an explanation of employee separation costs included in
    restructuring expense.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview
     30




---



##### Table of Contents



Overview
    of the Results for the Year Ended December 31,
    2005
    
    Revenue for 2005 of $60.4 million, up 5% from 2004 and up
    3% from 2003;
    License revenue for 2005 of $17.2 million, up 26% from 2004
    and up 42% from 2003;
    Support and service revenue for 2005 of $43.2 million, down
    2% from 2004 and down 7% from 2003;
    Service margins for 2005 of 59%, up from 58% in 2004 and up from
    55% in 2003;
    Total operating expenses for 2005 of $39.0 million, down
    from $40.6 million in 2004 and $43.0 million in 2003;
    Unrestricted cash and cash equivalents balances of
    $21.6 million at December 31, 2005, compared to
    $14.4 million at December 31, 2004;
    Days sales outstanding, based on
    end-of-period
    receivable balances and most recent quarters annualized
    revenues, of 67 days at December 31, 2005, compared to
    69 days at December 31, 2004;
    Current and long-term restructuring-related liabilities of
    $208,000 at December 31, 2005, compared to $783,000 at
    December 31, 2004; and
    Current and long-term deferred revenue of $16.2 million at
    December 31, 2005, compared to $19.0 million at
    December 31, 2004.        
    increase our pipeline of sales opportunities;
    integrate new talent into our sales and marketing organization;
    enhance our market position and awareness;
    enhance our solutions portfolio to address more customer needs;
    focus our resources and efforts on the market opportunities with
    the highest probability of success;
    diversify and expand partnerships with key system integration
    and technology vendors;
    aggressively market our recent major product releases; and
    maintain customer satisfaction levels.    Critical
    Accounting Policies and Estimates
   31




---



##### Table of Contents



Revenue
    Recognition
    SOP 98-9
      and/or
    time-and-materials
 32




---



##### Table of Contents



SOP 81-1, percentage-of-completion
      Allowance
    for Doubtful Accounts
    Impairment
    of Goodwill
    Restructuring
  No. 94-3.
  No. 94-3,
  Incomes
    Taxes
   33




---



##### Table of Contents



Recent
    Accounting Pronouncements
      Results
    of Operations
  period-to-period
  
    general economic conditions, which may affect our
    customers capital investment levels in management
    information systems and the timing of their purchases;
    the loss of any key technical, sales, accounting and finance,
    customer support or management personnel and the timing of any
    new hires;
    budget and spending decisions by our prospective and existing
    customers;
    customers and prospects decisions to defer orders or
    implementations, particularly large orders or implementations,
    from one quarter to the next, or to proceed with
    smaller-than-forecasted
    orders or implementations;
    level of purchases by our existing customers, including
    additional license and maintenance revenues;
    our ability to compete in the highly competitive customer
    management systems market;
    our ability to develop, introduce and market new products and
    product versions on a timely basis;
    rate of market acceptance of our solutions;
    variability in the mix of our license versus service revenue,
    the mix of our direct versus indirect license revenue and the
    mix of services that we perform versus those performed by
    third-party service providers; 34




---



##### Table of Contents




    our ability to successfully expand our operations, particularly
    our direct and indirect sales force and professional services
    organizations, and the amount and timing of expenditures related
    to this expansion;
    our ability to expand our sales pipeline through our marketing
    activities and the expenses associated with such marketing
    activities;
    the success of, the costs associated with, and the financial
    accounting effects of any acquisitions of companies or
    complementary technologies that we may complete;
    the expense we incur as a result of an impairment in our
    goodwill;
    the expense we will incur as a result of changes in rules for
    granting equity-based compensation; and
    changes in generally accepted accounting principles in the
    United States and the application of such changes to our
    financial statements.    Year Ended
    December 31,2003


2004


2005Consolidated Statement of
    Operations Data:Revenue:License


20.8
%


23.7
%


28.5
%Support and service


79.2



76.3



71.5Total revenue


100.0



100.0



100.0Cost of revenue:License


1.5



1.7



2.6Amortization of acquired technology


0.4



0.0



1.7Support and service


35.5



32.3



29.6Total cost of revenue


37.4



34.0



33.9Gross margin


62.6



66.0



66.1Operating expenses:Sales and marketing


35.3



33.6



31.9Research and development


20.3



18.4



16.2General and administrative


14.1



14.9



16.5Restructuring and other related
    charges


2.4



0.8



0.0Amortization of
    acquisition-related intangibles


1.4



1.1



0.0Severance charges


0.0



1.7



0.0Stock-based compensation


0.1



0.0



0.0Total operating expenses


73.6



70.5



64.6Income (loss) from operations


(11.0
)


(4.5
)


1.5Other income (expense), net


0.1



(0.6
)


0.1Change in fair value of
    outstanding warrants


0.6



0.9



0.0Investment losses and impairment


0.0



(0.7
)


0.0Loss before income taxes


(10.3
)


(4.9
)


1.6Income tax provision (benefit)


0.5



(0.1
)


0.2Minority interest in loss of
    consolidated subsidiary


(0.2
)


0.0



(0.2
)Net income (loss)


(10.6
)%


(4.8
)%


1.6
%  35




---



##### Table of Contents



Revenue
          Cost
    of Revenue
  Cost of
    license revenue
    Amortization
    of acquired technology
     36




---



##### Table of Contents



Cost of
    support and service revenue
      Costs
    and Expenses
  Sales and
    marketing
        Research
    and development
   37




---



##### Table of Contents



General
    and administrative
    Restructuring
    and other related charges
      Excess


EmployeeExcess


Facilities 


Separation


AssetFacilities


Warrants


Costs


Impairments


Other


TotalBalance at December 31, 2002

$
12,134


$
920


$
636


$



$
54


$
13,744Charge for the year ended
    December 31, 2003


444







769



209







1,422Cash payments and write-offs


(9,486
)






(1,334
)


(209
)


(54
)


(11,083
)Fair value adjustment






(355
)














(355
)Balance at December 31, 2003


3,092



565



71











3,728Charge for the year ended
    December 31, 2004


155







287











442Cash payments


(2,516
)






(358
)










(2,874
)Fair value adjustment






(513
)














(513
)Balance at
    December 31, 2004


731



52















783Cash payments and reclassifications


(523
)


(54
)














(577
)Fair value adjustment






2















2Balance at December 31, 2005

$
208


$



$



$



$



$
208  38




---



##### Table of Contents



Amortization
    of acquisition-related intangibles
    Severance
    charges
    Deferred
    stock-based compensation
   39




---



##### Table of Contents



Other
    Income (Expense), Net
    Change
    in Fair Value of Outstanding Warrants
    Investment
    Losses and Impairment
  other-than-temporary
  Income
    Taxes
    Minority
    Interest in Loss of Consolidated Subsidiary
   40




---



##### Table of Contents



Quarterly
    Results of Operations
      Three Months EndedMarch 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,2004


2004


2004


2004


2005


2005


2005


2005(In thousands, except per share
    data)(Unaudited)Consolidated Statement of
    Operations Data:Revenue:License

$
3,619


$
3,561


$
2,399


$
4,087


$
3,861


$
4,325


$
4,356


$
4,682Support and service


10,625



11,232



11,274



10,837



10,196



11,165



11,102



10,710Total revenue


14,244



14,793



13,673



14,924



14,057



15,490



15,458



15,392Cost of revenue:License


193



266



154



371



437



353



372



417Amortization of acquired technology


















256



256



256



256Support and service


4,456



4,515



4,674



4,969



4,207



4,571



4,537



4,561Total cost of revenue


4,649



4,781



4,828



5,340



4,900



5,180



5,165



5,234Gross margin


9,595



10,012



8,845



9,584



9,157



10,310



10,293



10,158Operating expenses:Sales and marketing


4,777



4,604



4,956



5,017



4,416



4,729



5,241



4,875Research and development


2,614



2,704



2,655



2,640



2,477



2,476



2,454



2,406General and administrative


1,924



2,227



2,210



2,239



2,777



2,266



2,188



2,725Restructuring and other related
    charges


484







(42
)


















Amortization of other
    acquisition-related intangibles


209



209



209



















Severance charges














996















Total operating expenses


10,008



9,744



9,988



10,892



9,670



9,471



9,883



10,006Income (loss) from operations


(413
)


268



(1,143
)


(1,308
)


(513
)


839



410



152Other income (expense), net


(193
)


(121
)


(41
)


15



(201
)


(25
)


257



76Change in fair value of outstanding
    warrants


122



90



102



199



(2
)










Investment losses and impairment














(403
)














Income (loss) before income taxes


(484
)


237



(1,082
)


(1,497
)


(716
)


814



667



228Income tax provision (benefit)


56



93



(61
)


(145
)


(19
)


(114
)


(131
)


372Minority interest in income (loss)
    of consolidated subsidiary


55



(31
)


(89
)


50



(78
)


(2
)


(25
)


Net income (loss)

$
(595
)

$
175


$
(932
)

$
(1,402
)

$
(619
)

$
930


$
823


$
(143
)Basic net income (loss) per
    share(1)(2)

$
(0.04
)

$
0.01


$
(0.06
)

$
(0.10
)

$
(0.04
)

$
0.06


$
0.05


$
(0.01
)Shares used in basic share
    calculation(1)


13,982



14,615



14,554



14,554



14,618



16,448



17,952



17,967Diluted net income (loss) per
    share(1)(2)

$
(0.04
)

$
0.01


$
(0.06
)

$
(0.10
)

$
(0.04
)

$
0.06


$
0.05


$
(0.01
)Shares used in diluted share
    calculation(1)


13,982



14,465



14,554



14,554



14,618



16,604



18,203



17,967  41




---



##### Table of Contents



(1)
    
    See Notes 1 and 12 of Notes to
    Consolidated Financial Statements for an explanation of the
    method used to calculate basic and diluted net income (loss) per
    share.(2)
    
    The sum of the quarterly per share
    amounts may not equal per share amounts reported for
    year-to-date
    periods due to changes in the number of weighted-average shares
    outstanding and the effects of rounding for each period.  Three Months EndedMarch 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,2004


2004


2004


2004


2005


2005


2005


2005Consolidated Statement of
    Operations Data:Revenue:License


25.4
%


24.1
%


17.5
%


27.4
%


27.5
%


27.9
%


28.2
%


30.4
%Support and service


74.6



75.9



82.5



72.6



72.5



72.1



71.8



69.6Total revenue


100.0



100.0



100.0



100.0



100.0



100.0



100.0



100.0Cost of revenue:License


1.3



1.8



1.1



2.5



3.1



2.3



2.4



2.7Amortization of acquired technology


0.0



0.0



0.0



0.0



1.8



1.7



1.7



1.7Support and service


31.3



30.5



34.2



33.3



29.9



29.4



29.3



29.6Total cost of revenue


32.6



32.3



35.3



35.8



34.9



33.4



33.4



34.0Gross margin


67.4



67.7



64.7



64.2



65.1



66.6



66.6



66.0Operating expenses:Sales and marketing


33.5



31.1



36.2



33.6



31.4



30.5



33.9



31.7Research and development


18.4



18.3



19.4



17.7



17.6



16.0



15.9



15.6General and administrative


13.5



15.1



16.2



15.0



19.8



14.6



14.2



17.7Restructuring and other related
    charges


3.4



0.0



(0.3
)


0.0



0.0



0.0



0.0



0.0Amortization of other
    acquisition-related intangibles


1.5



1.4



1.5



0.0



0.0



0.0



0.0



0.0Severance charges


0.0



0.0



0.0



6.7



0.0



0.0



0.0



0.0Stock-based compensation


0.0



0.0



0.0



0.0



0.0



0.0



0.0



0.0Total operating expenses


70.3



65.9



73.0



73.0



68.8



61.1



64.0



65.0Income (loss) from operations


(2.9
)


1.8



(8.3
)


(8.8
)


(3.7
)


5.5



2.6



1.0Other income (expense), net


(1.4
)


(0.8
)


(0.3
)


0.1



(1.4
)


(0.2
)


1.7



0.5Change in fair value of outstanding
    warrants


0.9



0.6



0.7



1.3



0.0



0.0



0.0



0.0Investment losses and impairment


0.0



0.0



0.0



(2.6
)


0.0



0.0



0.0



0.0Income (loss) before income taxes


(3.4
)


1.6



(7.9
)


(10.0
)


(5.1
)


5.3



4.3



1.5Income tax provision (benefit)


0.4



0.5



(0.4
)


(1.0
)


(0.1
)


(0.7
)


(0.8
)


2.4Minority interest in income (loss)
    of consolidated subsidiary


0.4



(0.1
)


(0.7
)


0.4



(0.06
)


0.0



(0.2
)


0.0Net income (loss)


(4.2
)%


1.2
%


(6.8
)%


(9.4
)%


(4.4
)%


6.0
%


5.3
%


(0.9
)%   Liquidity
    and Capital Resources
     42




---



##### Table of Contents



Off-balance
    Sheet Arrangements
    Tabular
    Disclosure of Contractual Obligations
    2007 to


2009 to2006


2008


2010


Thereafter


TotalOperating lease obligations not in
    restructuring

$
3,365


$
5,310


$
6,134


$
12,632


$
27,441Operating lease obligations in
    restructuring


1,010



1,914



481



(619
)


2,786Term loan obligation


167



56











223Third-party royalty commitments


557



1,278











1,835Total fixed commitments

$
5,099


$
8,558


$
6,615


$
12,013


$
32,285   No. 88-10,
     43




---



##### Table of Contents



Recent
    Accounting Pronouncements
  
 44




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
    Foreign
    Currency Risk
       45




---



##### Table of Contents



ITEM 8.
    CONSOLIDATED
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReports of
    Independent Registered Public Accounting Firm


47Consolidated
    Balance Sheets


49Consolidated
    Statements of Operations


50Consolidated
    Statements of Shareholders Equity and Comprehensive
    Loss


51Consolidated
    Statements of Cash Flows


52Notes to
    Consolidated Financial Statements


53  46




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     , Internal Control  Integrated Framework
        Internal Control  Integrated
    Framework Internal Control  Integrated
    Framework
        47




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           Internal
    Control  Integrated Framework
      48




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  CONSOLIDATED BALANCE SHEETS
  December 31,2004


2005(In thousands, exceptshare and per share
    data)ASSETSCurrent assets:Cash and cash equivalents

$
14,393


$
21,574Accounts receivable, less
    allowances of $494 in 2004 and $397 in 2005


10,509



11,533Deferred tax asset


89



Prepaid expenses and other


1,968



2,015Total current assets


26,959



35,122Property and equipment, net


3,711



2,709Purchased technology, net


4,095



3,071Goodwill, net


10,306



9,204Deferred tax asset


35



Other assets


450



556Total assets

$
45,556


$
50,662LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,205


$
2,054Salary and benefits payable


1,937



1,760Accrued liabilities


2,453



3,118Income taxes payable


217



87Restructuring-related liabilities


731



208Current portion of term loan


167



167Deferred revenue


17,050



15,211Total current liabilities


23,760



22,605Long-term accrued liabilities


464



Long-term deferred revenue


1,923



1,032Long-term restructuring-related
    liabilities  warrants


52



Long-term purchased technology
    obligation


1,842



908Long-term deferred rent


450



639Term loan


222



56Minority interest in joint venture


106



Commitments and contingenciesShareholders equity:Common stock, $0.01 par value:Authorized
    shares  80,000,000; issued and outstanding
    shares  14,615,823 in 2004 and 18,054,821 in 2005


144,736



154,277Accumulated deficit


(130,969
)


(129,978
)Accumulated other comprehensive
    income


2,970



1,123Total shareholders equity


16,737



25,422Total liabilities and
    shareholders equity

$
45,556


$
50,662    49




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended
    December 31,2003


2004


2005(In thousands, except per share
    data)Revenue:License

$
12,143


$
13,666


$
17,224Support and service


46,230



43,968



43,173Total revenue


58,373



57,634



60,397Cost of revenue:License


848



984



1,579Amortization of acquired technology


255







1,024Support and service


20,711



18,614



17,876Total cost of revenue


21,814



19,598



20,479Gross margin


36,559



38,036



39,918Operating expenses:Sales and marketing


20,629



19,354



19,261Research and development


11,838



10,613



9,813General and administrative


8,205



8,600



9,956Restructuring and other related
    charges


1,422



442



Amortization of
    acquisition-related intangibles


836



627



Severance charges






996



Stock-based compensation


70







Total operating expenses


43,000



40,632



39,030Income (loss) from operations


(6,441
)


(2,596
)


888Other income (expense), net


78



(340
)


107Change in fair value of
    outstanding warrants


355



513



(2
)Investment losses and impairment






(403
)


Income (loss) before income taxes


(6,008
)


(2,826
)


993Income tax provision (benefit)


264



(57
)


108Minority interest in loss of
    consolidated subsidiary


(118
)


(15
)


(106
)Net income (loss)

$
(6,154
)

$
(2,754
)

$
991Basic and diluted net income
    (loss) per share

$
(0.46
)

$
(0.19
)

$
0.06Shares used in calculation of
    basic net income (loss) per share


13,442



14,364



16,725Shares used in calculation of
    diluted net income (loss) per share


13,442



14,364



16,846    50




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY AND
 COMPREHENSIVE LOSS
  AccumulatedDeferred





Other


TotalCommon Stock


Stock-Based


Accumulated


Comprehensive


ShareholdersShares


Amount


Compensation


Deficit


Gain (Loss)


Equity(In thousands, except share
    data)Balance at January 1, 2003


12,696,739


$
139,459


$
(84
)

$
(122,061
)

$
(486
)

$
16,828Amortization of deferred
    stock-based compensation










30











30Reversal of deferred stock-based
    compensation associated with terminated employees






(54
)


54











Exercise of stock options


20,643



56















56Issuance of common stock under ESPP


109,340



366















366Proceeds from private placement,
    net of offering costs of $200


1,135,697



2,815















2,815Issuance of options to third-party
    consultant






2















2Issuance of common stock to
    third-party consultant


7,084



38















38Comprehensive loss:Foreign currency translation gain


















2,318Net loss














(6,154
)


Total comprehensive loss






















(3,836
)Balance at December 31, 2003


13,969,503



142,682







(128,215
)


1,832



16,299Exercise of stock options


28,972



46















46Issuance of common stock under ESPP


112,457



342















342Common stock issued in connection
    with purchased technology


504,891



1,666















1,666Comprehensive loss:Foreign currency translation gain


















1,138Net loss














(2,754
)


Total comprehensive loss






















(1,616
)Balance at December 31, 2004


14,615,823



144,736







(130,969
)


2,970



16,737Exercise of stock options


81,668



253















253Issuance of common stock under ESPP


164,586



414















414Restructuring related warrants






54















54Proceeds from private placement of
    common stock


2,825,097



7,854















7,854Stock issued in connection with
    purchase technology obligation


367,647



966















966Comprehensive loss:Foreign currency translation loss


















(1,847
)Net Income














991



Total comprehensive loss






















(856
)Balance at December 31, 2005


18,054,821


$
154,277


$



$
(129,978
)

$
1,123


$
25,422    51




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended
    December 31,2003


2004


2005(In thousands)OPERATING ACTIVITIESNet income (loss)

$
(6,154
)

$
(2,754
)

$
991Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation and amortization


4,182



2,323



2,395Imputed interest expense






82



66Deferred income tax expense
    (benefit)


(357
)


9



124Noncash stock-based compensation
    expense


70







Change in fair value of
    outstanding warrants


(355
)


(513
)


2Impairment on property and
    equipment


284







25Minority interest in loss of
    consolidated subsidiary


(118
)


(15
)


(106
)Impairment of equity investment






403



Currency gain on closure of
    foreign subsidiary










(145
)Changes in operating assets and
    liabilities:Accounts receivable, net


2,594



1,890



(1,024
)Prepaid expenses and other assets,
    net


1,951



(313
)


(187
)Accounts payable and accrued
    liabilities


(2,104
)


2,047



1,062Restructuring-related liabilities


(9,661
)


(2,432
)


(523
)Deferred revenue


(180
)


2,895



(2,730
)Income taxes


110



(553
)


(130
)Net cash provided by (used in)
    operating activities


(9,738
)


3,069



(180
)INVESTING ACTIVITIESRestricted cash


515



1,723



Acquisition of purchased technology






(400
)


Purchases of property and
    equipment, net


(1,198
)


(1,130
)


(548
)Net cash provided by (used in)
    investing activities


(683
)


193



(548
)FINANCING ACTIVITIESNet proceeds from sale of common
    stock


2,815







7,854Proceeds from exercise of stock
    options


56



46



414Proceeds from shares issued
    through employee stock purchase plan


366



342



253Proceeds from term loan






500



Payments on term loan






(111
)


(166
)Payments on capital lease
    obligations


(257
)






Net cash provided by financing
    activities


2,980



777



8,355Effects of exchange rate changes
    on cash


527



227



(446
)Net increase (decrease) in cash
    and cash equivalents


(6,914
)


4,266



7,181Cash and cash equivalents at
    beginning of year


17,041



10,127



14,393Cash and cash equivalents at end
    of year

$
10,127


$
14,393


$
21,574SUPPLEMENTAL CASH FLOW DISCLOSURESInterest paid

$
139


$
143


$
244Income taxes paid, net


565



298



380Payment of obligation with common
    stock


38







Purchased technology acquired in
    exchange for:Common stock issued






(1,666
)


Liabilities incurred or assumed






(2,029
)


Settlement of purchase technology
    liability with common stock










(966
)    52




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Description
    of the Company and Summary of Significant Accounting
    Policies  Description
    of the Company
      Reverse
    Stock Split
  one-for-four
  Principles
    of Consolidation
    Use of
    Estimates
   53




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Revenue
    Recognition
  SOP 98-9,
      and/or
    time-and-materials
  SOP 81-1,
   54




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Cash
    Equivalents and Restricted Cash
      Fair
    Values of Financial Instruments
  Investment Losses and Impairment
  Property
    and Equipment
    Intangible
    Assets and Goodwill
  pooling-of-interests non-amortization non-amortization
     55




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Impairment
    of Long-Lived Assets
    Investment
    Losses and Impairment
  other-than-temporary other-than-temporary. other-than-temporary other-than-temporary
  Restructuring
  No. 94-3.
  No. 94-3,
  Research
    and Development Costs
   56




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounts
    Receivable and Concentration of Credit Risk
      Foreign
    Currency Translation
      Income
    Taxes
   57




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock-Based
    Compensation
  intrinsic-value-based
    intrinsic-value-based fair-value-based
  Year Ended
    December 31,2003


2004


2005(In thousands, except per share
    data)Net Income (loss):As reported

$
(6,154
)

$
(2,754
)

$
991Add: stock-based employee expense
    included in reported net loss(1)


30







Deduct: stock-based employee
    compensation expense determined under
    fair-value-based
    method for all awards(2)


(5,281
)


(3,762
)


(2,505
)Pro forma

$
(11,405
)

$
(6,516
)

$
(1,514
)Net income (loss) per share:As reported

$
(0.46
)

$
(0.19
)

$
0.06Pro forma

$
(0.85
)

$
(0.45
)

$
(0.09
)     (1)
    
    Excludes $38,000 in stock compensation expense associated with
    the restricted stock awarded to a non-employee consultant and
    $2,000 of stock-based compensation expense associated with
    options granted to a non-employee consultant in 2003.(2)
    
    See Note 11 for details of the assumptions used to arrive
    at the fair value of each option grant. 58




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Income
    (Loss) Per Share
    Other
    Comprehensive Income
    Advertising
    Interest
    Expense
    Business
    Segments
    Reclassifications
    Recently
    Issued Accounting Pronouncements
   
   59




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2.
    Acquisitions,
    Purchased Technology, Other Intangible Assets and
    Goodwill      December 31,


December 31,2004


2005Purchased technology

$
6,535


$
6,450Less: accumulated amortization


(2,440
)


(3,379
)Purchased technology, net

$
4,095


$
3,071Other intangible assets

$
4,889


$
4,349Less: accumulated amortization


(4,889
)


(4,349
)Other intangible assets, net

$



$
Goodwill

$
17,686


$
15,805Less: accumulated amortization


(7,380
)


(6,601
)Goodwill, net

$
10,306


$
9,204     3.
    Restructuring
    and Other Related Charges   60




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Excess


EmployeeExcess


Facilities 


Separation


AssetFacilities


Warrants


Costs


Impairments


Other


TotalBalance at December 31, 2002

$
12,134


$
920


$
636


$



$
54


$
13,744Charge for the year ended
    December 31, 2003


444







769



209







1,422Cash payments and write-offs


(9,486
)






(1,334
)


(209
)


(54
)


(11,083
)Fair value adjustment






(355
)














(355
)Balance at December 31, 2003


3,092



565



71











3,728Charge for the year ended
    December 31, 2004


155







287











442Cash payments and write offs


(2,516
)






(358
)










(2,874
)Fair value adjustment






(513
)














(513
)Balance at December 31, 2004


731



52















783Cash payments and reclassifications


(523
)


(54
)














(577
)Fair value adjustment






2















2Balance at December 31, 2005

$
208


$



$



$



$



$
208   21,000-square-foot 100,000-square-foot
   61




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      4.
    Investment
    Losses and Impairment  other-than-temporary
  5.
    Onyx
    Japan       62




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      6.
    Stock-Based
    Compensation      Year Ended
    December 31,2003


2004


2005(In thousands)Support and service cost of sales

$
30


$



$
Sales and marketing










Research and development










General and administrative


40







Total stock-based compensation

$
70


$



$
   7.
    Property
    and Equipment    December 31,2004


2005(In thousands)Computer and office equipment

$
5,646


$
7,770Purchased software


2,242



71Furniture and fixtures


1,540



1,326Leasehold improvements


3,230



3,03912,658



12,206Less accumulated depreciation and
    amortization


(8,947
)


(9,497
)$
3,711


$
2,709   8.
    Line of
    Credit   63




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      9.
    Debt and
    Commitments  Leases
      Operating Leases(In thousands)Year ending December 31:2006

$
4,3752007


3,9612008


3,2652009


3,2942010


3,320Thereafter


12,013      64




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Operating Leases(In thousands)Year ending December 31:2006

$
1,3562007


1,3692008


1,1522009


7172010 and thereafter


   Third-Party
    License Agreements
    Term
    Loan
    Purchased
    Technology Obligation
   65




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Guarantees    11.
    Shareholders
    Equity  Shareholder
    Rights Plan
          Private
    Offering
   66




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Increase
    in Authorized Capital
    Warrants
    for Common Stock
        Common
    Stock Issued in Conjunction with Purchased Technology
   67




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    1994
    Combined Incentive and Nonqualified Stock Option
    Plan
    1998
    Stock Incentive Compensation Plan
    2001
    Nonofficer Employee Stock Compensation Plan
   68




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Chief
    Executive Officer Stock Compensation Plan
       69




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Option Activity
    Outstanding OptionsWeightedShares





AverageAvailable


Number of


Exercisefor Grant


Shares


PricesOutstanding at January 1,
    2003 (exercisable  1,249,105)


1,289,900



2,456,673


$
28.201998 option plan increase


624,139



Options granted


(1,691,405
)


1,691,405


$
4.34Options cancelled


821,407



(821,407
)

$
27.37Options cancelled outside the
    Companys stock option plans






(63,820
)

$
31.28Options exercised






(20,643
)

$
2.72Outstanding at December 31,
    2003 (exercisable  1,517,796)


1,044,041



3,242,208


$
16.091998 option plan increase


672,100



Options granted


(1,939,315
)


1,939,315


$
3.51Options granted outside the
    Companys stock option plans






600,000


$
5.79Options cancelled


1,261,075



(1,261,075
)

$
10.90Options exercised






(28,972
)

$
1.64Outstanding at December 31,
    2004 (exercisable  2,032,060)


1,037,901



4,491,476


$
10.831998 option plan increase


718,200



Options granted


(1,307,990
)


1,307,990


$
3.39Options cancelled


1,710,734



(1,710,734
)

$
11.68Options exercised






(81,668
)

$
3.32Outstanding at December 31,
    2005 (exercisable  1,958,921)


2,158,845



4,007,064


$
8.19     OutstandingWeighted AverageRemaining


ExercisableNumber of


Weighted Average


Contractual Life


Number of


Weighted AverageRange of Exercise
    Prices

Options


Exercise Prices


(Years)


Options


Exercise Prices$  0.40  $  2.98


458,158


$
2.33



7.71



95,768


$
0.72$  3.00  $  3.37


401,700


$
3.35



9.08



103,357


$
3.35$  3.38  $  3.43


49,000


$
3.39



9.06



9,500


$
3.38$  3.49  $  3.50


592,325


$
3.49



8.42



326,823


$
3.50$  3.51  $  3.86


711,314


$
3.74



8.74



249,646


$
3.74$  3.88  $  4.16


584,564


$
4.05



8.66



225,352


$
4.14$  4.25  $  5.50


448,584


$
4.84



7.18



293,277


$
4.73$  5.80  $ 15.96


403,234


$
12.66



6.50



297,359


$
13.02$ 16.20  $151.25


355,435


$
43.48



4.59



355,089


$
43.51$152.38  $152.38


2,750


$
152.38



4.17



2,750


$
152.38  70




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     1998
    Employee Stock Purchase Plan
          Fair
    Value of Stock Options and Employee Stock Purchase Rights Under
    SFAS No. 123
    December 31,2003

2004

2005Expected dividend yield

0.0%

0.0%

0.0%Risk-free interest rate

3.0%

3.1% to 3.6%

3.7% to 4.4%Volatility

72% to 85%

56% to 69%

51% to 66%Expected life

5 years

5 years

5 years    71




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Common
    Shares Reserved for Future Issuance
    Stock options


6,165,909Employee Stock Purchase Plan


246,7266,412,635   12.
    Earnings
    (Loss) Per Share    Year Ended
    December 31,2003


2004


2005(In thousands, except per share
    data)Net income (loss)(A)

$
(6,154
)

$
(2,754
)

$
991Weighted average number of common
    shares(B)


13,442



14,364



16,725Effect of dilutive securities:Stock options










121Warrants










Adjusted weighted average shares
    and assumed conversions(C)


13,442



14,364



16,846Loss per share:Basic(A)/(B)

$
(0.46
)

$
(0.19
)

$
0.06Diluted(A)/(C)

$
(0.46
)

$
(0.19
)

$
0.06    72




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     13.
    Income
    Taxes    Year Ended
    December 31,2003


2004


2005(In thousands)U.S.

$
(7,263
)

$
(2,327
)

$
1,656Foreign


1,255



(499
)


(663
)$
(6,008
)

$
(2,826
)

$
993     Year Ended
    December 31,2003


2004


2005(In thousands)Current:Federal

$



$



$
10State and local


20



20



20Foreign


601



(86
)


(46
)Total current income taxes


621



(66
)


(16
)Deferred  foreign


(357
)


9



124Income tax provision (benefit)

$
264


$
(57
)

$
108     Year Ended
    December 31,2003


2004


2005(In thousands)Income tax expense (benefit) at
    statutory rate of 34%

$
(2,043
)

$
(961
)

$
338State taxes, net of federal benefit


13



13



13Income offset by prior year
    unbenefited losses










(243
)Losses producing no current tax
    benefit


2,294



891



Income tax provision

$
264


$
(57
)

$
108    73




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##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        December 31,2004


2005(In thousands)Deferred tax assets:U.S. net operating loss
    carryforwards

$
40,434


$
39,526U.S. capital loss
    carryforwards


725



721Foreign net operating loss
    carryforwards


2,821



4,002Research and development credit
    carryforwards


2,788



2,873Foreign tax credit carryforwards


918



608Restructuring and other accrued
    liabilities


276



75Other


2,583



2,382Total gross deferred tax assets


50,545



50,187Less valuation allowance


(50,421
)


(50,187
)Net deferred tax assets

$
124


$
       14.
    Employee
    Benefit Plan    15.
    Segment
    and Geographic Information   74




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        United


Rest ofAmericas


Kingdom


World


TotalYear ended December 31,
    2003:Revenue

$
35,454


$
8,002


$
14,917


$
58,373Year ended December 31,
    2004:Revenue

$
36,991


$
7,027


$
13,616


$
57,634Year ended December 31,
    2005:Revenue

$
38,216


$
9,551


$
12,630


$
60,397   16.
    Litigation
    and Contingencies    17.
    Liquidity     75




---



##### Table of Contents



ONYX
    SOFTWARE CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   76




---



##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Form 10-K
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f) Internal Control  Integrated
    Framework. page 45-46 Form 10-K.
  Changes
    in Internal Control Over Financial Reporting
    Inherent
    Limitations on the Effectiveness of Controls
     77




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT        Code of
    Ethics
  Regulation S-K, http://www.onyx.com/pdf/CorpGov-CodeofEthics.pdf
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED SHAREHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS   78




---



##### Table of Contents



ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements and Financial Statement
    Schedules:
  1.  Index
    to Consolidated Financial Statements
  PageReports of Independent Registered
    Public Accounting Firm


47Consolidated Financial Statements:Balance Sheets


49Statements of Operations


50Statements of Shareholders
    Equity and Comprehensive Loss


51Statements of Cash Flows


52Notes to Consolidated Financial
    Statements


53   2.  Index
    to Financial Statement Schedules
  Schedule II  Valuation
    and Qualifying Accounts     Exhibits
  Number

Description3
.1

Restated Articles of Incorporation
    of the registrant(exhibit 3.1)(m)3
.2

Amended and Restated Bylaws of the
    registrant (exhibit 3.2)(s)4
.1

Rights Agreement dated
    October 25, 1999 between the registrant and ChaseMellon
    Shareholder Services, L.L.C. (exhibit 2.1)(b)4
.2

Amendment No. 1 to Rights
    Agreement dated March 5, 2003 between the registrant and
    Mellon Investor Services LLC (exhibit 4.1)(l)10
.1*

Lease Termination Agreement dated
    November 7, 2002 between EOP-Sunset North Bellevue, L.L.C.
    and the registrant (exhibit 10.2)(i)10
.2

Form of Indemnification Agreement
    between the registrant and each director and officer of the
    registrant (exhibit 10.12)(a)10
.3

Amended and Restated 1994 Stock
    Option Plan (exhibit 10.7)(a)10
.4

1998 Stock Incentive Compensation
    Plan as amended and restated on March 21, 2003
    (exhibit 10.5)(q)10
.5

2001 Nonofficer Employee Stock
    Compensation Plan as amended and restated April 27, 2001
    (exhibit 10.1)(f)10
.6

1998 Employee Stock Purchase Plan
    as amended and restated on April 6, 2001
    (exhibit 10.1)(g)10
.7

Office Building Lease dated
    June 6, 2000 between the registrant and Bellevue Hines
    Development, L.L.C. and First Amendment to Lease dated
    June 20, 2000 (exhibit 10.1)(c)10
.8

Second Amendment to Lease dated
    August 6, 2000 between the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.8)(e) 79




---



##### Table of Contents



Number

Description10
.9

Third Amendment to Lease dated
    December 20, 2002 between the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.2)(j)10
.10

Office Building Lease dated
    December 20, 2002 between the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.1)(j)10
.11

Form of Registration Rights
    Agreement entered into by the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.3)(j)10
.12

Form of Warrant LT-1 issued to
    Bellevue Hines Development, L.L.C. (exhibit 10.4)(j)10
.13

Form of Warrant LT-2 issued to
    Bellevue Hines Development, L.L.C. (exhibit 10.5)(j)10
.14

Form of Warrant LT-3 issued to
    Bellevue Hines Development, L.L.C. (exhibit 10.6)(j)10
.15

Joint Venture Agreement dated
    September 14, 2000 between the registrant and Prime Systems
    Corporation (exhibit 10.1)(d)10
.16

Loan and Security Agreement dated
    February 14, 2002 by and between the registrant and Silicon
    Valley Bank (exhibit 10.11)(h)10
.17

Amendment to Loan Documents dated
    July 10, 2002 by and between the registrant and Silicon
    Valley Bank (exhibit 10.1)(k)10
.18

Amendment to Loan Documents dated
    December 27, 2002 by and between the registrant and Silicon
    Valley Bank (exhibit 10.19)(l)10
.19

Amendment to Loan Documents dated
    March 28, 2003 by and between the registrant and Silicon
    Valley Bank (exhibit 10.1)(n)10
.20

Amendment to Loan Documents dated
    May 5, 2003 by and between the registrant and Silicon
    Valley Bank (exhibit 10.2)(n)10
.21

Loan and Security Agreement (Exim
    Program) dated May 5, 2003 by and between the registrant
    and Silicon Valley Bank (exhibit 10.3)(n)10
.22

Amendment to Loan Documents dated
    January 12, 2004 by and between the registrant and Silicon
    Valley Bank (exhibit 10.23)(q)10
.23

Amendment to Loan Documents (Exim
    Program) dated January 12, 2004 by and between the
    registrant and Silicon Valley Bank (exhibit 10.24)(q)10
.24

Amendment to Loan Documents dated
    March 31, 2004 by and between the registrant and Silicon
    Valley Bank (exhibit 10.1)(p)10
.25

Amendment to Loan Documents (Exim
    Program) dated March 31, 2004 by and between the registrant
    and Silicon Valley Bank (exhibit 10.2)(p)10
.26

Intellectual Property Security
    Agreement dated November 8, 2000 between the registrant and
    Silicon Valley Bank (exhibit 10.7)(e)10
.27

Letter Agreement dated
    March 5, 2003 by and between the registrant and Mazama
    Capital Management, Inc. (exhibit 10.30)(l)10
.28

Asset Purchase Agreement dated
    April 6, 2004 by and among Visuale, Inc. Softworks
    Australia Pty Ltd, certain stockholders of Visuale, Inc. and the
    registrant (exhibit 10.1)(o)10
.29

Employment Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.1)(r)10
.30

First Amendment to Employment
    Agreement dated January 20, 2005 by and between the
    registrant and Janice Anderson (exhibit 10.1)(u)10
.31

Second Amendment to Employment
    Agreement dated July 11, 2005 by and between the registrant
    and Janice Anderson (exhibit 10.1)(w)10
.32

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.2)(r)10
.33

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.3)(r)10
.34

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.4)(r) 80




---



##### Table of Contents



Number

Description10
.35

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.5)(r)10
.36

Stock Option Agreement dated
    January 20, 2005 by and between the registrant and Janice
    Anderson (exhibit 10.2)(u)10
.37

Employment Agreement dated as of
    September 20, 2004 by and between the registrant and Jack
    Denault (exhibit 10.1)(t)10
.38

Employment Agreement dated
    March 16, 2005 between the registrant and Robert J.
    Chamberlain (exhibit 10.1)(v)10
.39

Common Stock Purchase Agreement
    dated May 12, 2005 by and between the registrant and the
    purchasers named therein (exhibit 10.1)(x)21
.1

Subsidiaries of the registrant23
.1

Consent of KPMG LLP, Independent
    Registered Public Accounting Firm24
.1

Power of Attorney (contained on
    signature page)31
.1

Certification of Chief Executive
    Officer pursuant to
    Rules 13a-14(a)
    and
    15d-14(a)
    under the Securities Exchange Act of 1934, as amended31
.2

Certification of Chief Financial
    Officer pursuant to
    Rules 13a-14(a)
    and
    15d-14(a)
    under the Securities Exchange Act of 1934, as amended32
.1

Certification of Chief Executive
    Officer furnished pursuant to
    Rules 13a-14(b)
    and
    15d-14(b)
    under the Securities Exchange Act of 1934, as amended, and
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial
    Officer furnished pursuant to
    Rules 13a-14(b)
    and
    15d-14(b)
    under the Securities Exchange Act of 1934, as amended, and
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Confidential treatment has been granted for portions of this
    document.
    
    Filed herewith.(a)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form S-1
    (No. 333-68559)
    filed on December 8, 1998, as amended.(b)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form 8-A
    (No. 0-25361)
    filed on October 28, 1999.(c)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2000.(d)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed October 23, 2000.(e)
    
    Incorporated by reference to the designated exhibit to the
    registrants second Current Report on
    Form 8-K
    (No. 0-25361)
    filed February 6, 2001.(f)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-K
    (No. 0-25361)
    for the quarter ended March 31, 2001.(g)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2001.(h)
    
    Incorporated by reference to the designated exhibit to the
    registrants first Current Report on
    Form 8-K
    (No. 0-25361)
    filed January 29, 2002.(i)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended September 30, 2002.(j)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed January 13, 2003.(k)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2002. 81




---



##### Table of Contents



(l)
    
    Incorporated by reference to the designated exhibit to the
    registrants Annual Report on
    Form 10-K
    (No. 0-25361)
    for the year ended December 31, 2002.(m)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended September 30, 2003.(n)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended March 31, 2003.(o)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed April 8, 2004.(p)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended March 31, 2004.(q)
    
    Incorporated by reference to the designated exhibit to the
    registrants Annual Report on
    Form 10-K
    (No. 0-25361)
    for the year ended December 31, 2003.(r)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed June 9, 2004.(s)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2004.(t)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed November 1, 2004.(u)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed January 26, 2005(v)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed March 18, 2005.(w)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed July 14, 2005.(x)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed May 13, 2005. 82




---



##### Table of Contents



SIGNATURES      By:
    /s/  JANICE
    P. ANDERSON    Chief Executive Officer, President and Chairman of the
    Board
  POWER OF
    ATTORNEY
  attorney-in-fact attorneys-in-fact attorneys-in-fact
    Name

Title

Date/s/  JANICE
    P. ANDERSONJanice
    P. Anderson

Chief Executive Officer, President
    and Chairman of the Board
    (Principal Executive Officer)

March 9, 2006/s/  ROBERT
    J. CHAMBERLAINRobert
    J. Chamberlain

Chief Financial Officer

March 14, 2006/s/  TERESA
    A. DIALTeresa
    A. Dial

Director

March 14, 2006/s/  WILLIAM
    B. ELMOREWilliam
    B. Elmore

Director

March 10, 2006/s/  CHARLES
    M. BOESENBERGCharles
    M. Boesenberg

Director

March 14, 2006/s/  WILLIAM
    PORTERWilliam
    Porter

Director

March 10, 2006 83




---



##### Table of Contents



Name

Title

Date/s/  DANIEL
    R. SANTELLDaniel
    R. Santell

Director

March 14, 2006/s/  ROBERT
    M. TARKOFFRobert
    M. Tarkoff

Director

March 9, 2006  84




---



##### Table of Contents



SCHEDULE II  VALUATION
    AND QUALIFYING ACCOUNTS
    ONYX SOFTWARE CORPORATION
    December 31, 2004
    (In thousands)
  Column A

Column B


Column C Additions


Column D


Column ECharged toBalance at


Charged to


OtherBeginning


Costs and


Accounts 


Deductions 


Balance atDescription

of Period


Expenses


Describe(1)


Describe(2)


End of Period(In thousands)Year ended December 31, 2003Deducted from asset accounts:Accounts receivable allowance

$
1,039


$
(225
)

$



$
(326
)

$
488Year ended December 31, 2004Deducted from asset accounts:Accounts receivable allowance

$
488


$
44


$
19


$
(57
)

$
494Year ended December 31, 2005Deducted from asset accounts:Accounts receivable allowance

$
494


$
(30
)

$



$
(67
)

$
397     (1)
    
    In 2004, amounts charged against revenue.(2)
    
    Uncollectible accounts written off, net of recoveries.




---



##### Table of Contents



EXHIBIT INDEX
  Number

Description3
.1

Restated Articles of Incorporation
    of the registrant (exhibit 3.1)(m)3
.2

Amended and Restated Bylaws of the
    registrant (exhibit 3.2)(s)4
.1

Rights Agreement dated
    October 25, 1999 between the registrant and ChaseMellon
    Shareholder Services, L.L.C. (exhibit 2.1)(b)4
.2

Amendment No. 1 to Rights
    Agreement dated March 5, 2003 between the registrant and
    Mellon Investor Services LLC (exhibit 4.1)(l)10
.1*

Lease Termination Agreement dated
    November 7, 2002 between EOP-Sunset North Bellevue, L.L.C.
    and the registrant (exhibit 10.2)(i)10
.2

Form of Indemnification Agreement
    between the registrant and each director and officer of the
    registrant (exhibit 10.12)(a)10
.3

Amended and Restated 1994 Stock
    Option Plan (exhibit 10.7)(a)10
.4

1998 Stock Incentive Compensation
    Plan as amended and restated on March 21, 2003
    (exhibit 10.5)(q)10
.5

2001 Nonofficer Employee Stock
    Compensation Plan as amended and restated April 27, 2001
    (exhibit 10.1)(f)10
.6

1998 Employee Stock Purchase Plan
    as amended and restated on April 6, 2001
    (exhibit 10.1)(g)10
.7

Office Building Lease dated
    June 6, 2000 between the registrant and Bellevue Hines
    Development, L.L.C. and First Amendment to Lease dated
    June 20, 2000 (exhibit 10.1)(c)10
.8

Second Amendment to Lease dated
    August 6, 2000 between the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.8)(e)10
.9

Third Amendment to Lease dated
    December 20, 2002 between the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.2)(j)10
.10

Office Building Lease dated
    December 20, 2002 between the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.1)(j)10
.11

Form of Registration Rights
    Agreement entered into by the registrant and Bellevue Hines
    Development, L.L.C. (exhibit 10.3)(j)10
.12

Form of Warrant LT-1 issued to
    Bellevue Hines Development, L.L.C. (exhibit 10.4)(j)10
.13

Form of Warrant LT-2 issued to
    Bellevue Hines Development, L.L.C. (exhibit 10.5)(j)10
.14

Form of Warrant LT-3 issued to
    Bellevue Hines Development, L.L.C. (exhibit 10.6)(j)10
.15

Joint Venture Agreement dated
    September 14, 2000 between the registrant and Prime Systems
    Corporation (exhibit 10.1)(d)10
.16

Loan and Security Agreement dated
    February 14, 2002 by and between the registrant and Silicon
    Valley Bank (exhibit 10.11)(h)10
.17

Amendment to Loan Documents dated
    July 10, 2002 by and between the registrant and Silicon
    Valley Bank (exhibit 10.1)(k)10
.18

Amendment to Loan Documents dated
    December 27, 2002 by and between the registrant and Silicon
    Valley Bank (exhibit 10.19)(l)10
.19

Amendment to Loan Documents dated
    March 28, 2003 by and between the registrant and Silicon
    Valley Bank (exhibit 10.1)(n)10
.20

Amendment to Loan Documents dated
    May 5, 2003 by and between the registrant and Silicon
    Valley Bank (exhibit 10.2)(n)10
.21

Loan and Security Agreement (Exim
    Program) dated May 5, 2003 by and between the registrant
    and Silicon Valley Bank (exhibit 10.3)(n)10
.22

Amendment to Loan Documents dated
    January 12, 2004 by and between the registrant and Silicon
    Valley Bank (exhibit 10.23)(q)10
.23

Amendment to Loan Documents (Exim
    Program) dated January 12, 2004 by and between the
    registrant and Silicon Valley Bank (exhibit 10.24)(q)10
.24

Amendment to Loan Documents dated
    March 31, 2004 by and between the registrant and Silicon
    Valley Bank (exhibit 10.1)(p)




---



##### Table of Contents



Number

Description10
.25

Amendment to Loan Documents (Exim
    Program) dated March 31, 2004 by and between the registrant
    and Silicon Valley Bank (exhibit 10.2)(p)10
.26

Intellectual Property Security
    Agreement dated November 8, 2000 between the registrant and
    Silicon Valley Bank (exhibit 10.7)(e)10
.27

Letter Agreement dated
    March 5, 2003 by and between the registrant and Mazama
    Capital Management, Inc. (exhibit 10.30)(l)10
.28

Asset Purchase Agreement dated
    April 6, 2004 by and among Visuale, Inc. Softworks
    Australia Pty Ltd, certain stockholders of Visuale, Inc. and the
    registrant (exhibit 10.1)(o)10
.29

Employment Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.1)(r)10
.30

First Amendment to Employment
    Agreement dated January 20, 2005 by and between the
    registrant and Janice Anderson (exhibit 10.1)(u)10
.31

Second Amendment to Employment
    Agreement dated July 11, 2005 by and between the registrant
    and Janice Anderson (exhibit 10.1)(w)10
.32

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.2)(r)10
.33

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.3)(r)10
.34

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.4)(r)10
.35

Stock Option Agreement dated
    June 7, 2004 by and between the registrant and Janice
    Anderson (exhibit 10.5)(r)10
.36

Stock Option Agreement dated
    January 20, 2005 by and between the registrant and Janice
    Anderson (exhibit 10.2)(u)10
.37

Employment Agreement dated as of
    September 20, 2004 by and between the registrant and Jack
    Denault (exhibit 10.1)(t)10
.38

Employment Agreement dated
    March 16, 2005 between the registrant and Robert J.
    Chamberlain (exhibit 10.1)(v)10
.39

Common Stock Purchase Agreement
    dated May 12, 2005 by and between the registrant and the
    purchasers named therein (exhibit 10.1)(x)21
.1

Subsidiaries of the registrant23
.1

Consent of KPMG LLP, Independent
    Registered Public Accounting Firm24
.1

Power of Attorney (contained on
    signature page)31
.1

Certification of Chief Executive
    Officer pursuant to
    Rules 13a-14(a)
    and
    15d-14(a)
    under the Securities Exchange Act of 1934, as amended31
.2

Certification of Chief Financial
    Officer pursuant to
    Rules 13a-14(a)
    and
    15d-14(a)
    under the Securities Exchange Act of 1934, as amended32
.1

Certification of Chief Executive
    Officer furnished pursuant to
    Rules 13a-14(b)
    and
    15d-14(b)
    under the Securities Exchange Act of 1934, as amended, and
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial
    Officer furnished pursuant to
    Rules 13a-14(b)
    and
    15d-14(b)
    under the Securities Exchange Act of 1934, as amended, and
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Confidential treatment has been granted for portions of this
    document.
    
    Filed herewith.(a)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form S-1
    (No. 333-68559)
    filed on December 8, 1998, as amended.(b)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form 8-A
    (No. 0-25361)
    filed on October 28, 1999.




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##### Table of Contents



(c)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2000.(d)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed October 23, 2000.(e)
    
    Incorporated by reference to the designated exhibit to the
    registrants second Current Report on
    Form 8-K
    (No. 0-25361)
    filed February 6, 2001.(f)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-K
    (No. 0-25361)
    for the quarter ended March 31, 2001.(g)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2001.(h)
    
    Incorporated by reference to the designated exhibit to the
    registrants first Current Report on
    Form 8-K
    (No. 0-25361)
    filed January 29, 2002.(i)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended September 30, 2002.(j)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed January 13, 2003.(k)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2002.(l)
    
    Incorporated by reference to the designated exhibit to the
    registrants Annual Report on
    Form 10-K
    (No. 0-25361)
    for the year ended December 31, 2002.(m)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended September 30, 2003.(n)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended March 31, 2003.(o)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed April 8, 2004.(p)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended March 31, 2004.(q)
    
    Incorporated by reference to the designated exhibit to the
    registrants Annual Report on
    Form 10-K
    (No. 0-25361)
    for the year ended December 31, 2003.(r)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed June 9, 2004.(s)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    (No. 0-25361)
    for the quarter ended June 30, 2004.(t)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed November 1, 2004.(u)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed January 26, 2005.(v)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed March 18, 2005.(w)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed July 14, 2005.(x)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    (No. 0-25361)
    filed May 13, 2005.