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Onvia 10-Q 2010
onviaq1-10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)


 
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010
 
 
OR

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

For the transition period from _____ to _____

Commission file number 000-29609


ONVIA, INC.
(Exact name of registrant as specified in its charter)

Delaware
91-1859172

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)
509 Olive Way, Suite 400, Seattle, Washington 98101
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (206) 282-5170


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

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

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer [  ]   Accelerated filer [  ]   Non-accelerated filer [  ]   Smaller reporting company [X]

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

Common stock, par value $.0001 per share: 8,287,298 shares outstanding as of April 30, 2010.

 
 

 

ONVIA, INC.

INDEX
 
Page
  PART I.  FINANCIAL INFORMATION
1
Item 1.  Unaudited Condensed Consolidated Financial Statements
1
Condensed Consolidated Balance Sheets (Unaudited)
1
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
2
Condensed Consolidated Statements of Cash Flows (Unaudited)
3
Notes To Condensed Consolidated Financial Statements (Unaudited)
4
1.        Basis of Presentation
4
2.        Use of Estimates
4
3.        Stock-Based Compensation and Stock Option Activity
4
4.        Earnings per Share
6
5.        Short-Term Investments
6
6.        Prepaid and Other Current Assets
7
7.        Property and Equipment
8
8.        Accrued Expenses
8
9.        New Accounting Pronouncements
8
10.      Commitments and Contingencies
9
11.      Provision for Income Taxes
11
12.      Security Deposits
11
13.      Subsequent Events
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12
Company Overview
12
Executive Summary of Operations and Financial Position
16
Seasonality
17
Results of Operations for the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
18
Critical Accounting Policies and Management Estimates
19
Contractual Obligations
22
Liquidity and Capital Resources
22
Recent Accounting Pronouncements
23
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
24
Item 4(T). Controls and Procedures
24
PART II. OTHER INFORMATION
25
Item 1.  Legal Proceedings
25
Item 1A.  Risk Factors
25
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
26
Item 3.  Defaults Upon Senior Securities
26
Item 4.  Removed and Reserved
26
Item 5.  Other Information
26
Item 6.  Exhibits
27
SIGNATURES
28
 
 
 

 

           PART I.  FINANCIAL INFORMATION
 
Item 1.  Unaudited Condensed Consolidated Financial Statements
 
Onvia, Inc.
Condensed Consolidated Balance Sheets
   
March 31,
2010
   
December 31,
2009 (1)
 
   
(Unaudited)
 
   
(In thousands, except share data)
 
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 2,663     $ 1,647  
Short-term investments, available-for-sale
    10,632       12,632  
Accounts receivable, net of allowance for doubtful accounts of $103 and $119
    2,396       1,687  
Prepaid expenses and other current assets, current portion
    577       716  
Reimbursable tenant improvements
    147       147  
Security deposits, current portion
    135       135  
                 
Total current assets
    16,550       16,964  
                 
LONG TERM ASSETS:
               
Property and equipment, net of accumulated depreciation
    1,613       1,226  
Security deposits, net of current portion
    134       269  
Internal use software, net of accumulated amortization
    6,987       6,615  
Prepaid expenses and other assets, net of current portion
    14       20  
                 
Total long term assets
    8,748       8,130  
                 
TOTAL ASSETS
  $ 25,298     $ 25,094  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
CURRENT LIABILITIES:
               
Accounts payable
  $ 1,607     $ 1,585  
Accrued expenses
    899       1,268  
Obligations under capital leases
    -       6  
Unearned revenue, current portion
    11,630       11,275  
Deferred rent, current portion
    88       88  
                 
Total current liabilities
    14,224       14,222  
                 
LONG TERM LIABILITIES:
               
Unearned revenue, net of current portion
    462       270  
Deferred rent, net of current portion
    812       832  
                 
Total long term liabilities
    1,274       1,102  
                 
TOTAL LIABILITIES
    15,498       15,324  
                 
COMMITMENTS AND CONTINGENCIES (Note 10)
               
                 
STOCKHOLDERS’ EQUITY:
               
Preferred stock; $.0001 par value: 2,000,000 shares authorized; no shares issued or outstanding
    -       -  
Common stock; $.0001 par value: 11,000,000 shares authorized; 8,287,324 and 8,283,296 shares issued; and 8,287,298 and 8,283,270 shares outstanding
    1       1  
Treasury stock, at cost: 26 and 26 shares
    -       -  
Additional paid in capital
    352,623       352,615  
Accumulated other comprehensive income / (loss)
    2       (3 )
Accumulated deficit
    (342,826 )     (342,843 )
                 
Total stockholders’ equity
    9,800       9,770  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 25,298     $ 25,094  
(1) Derived from audited financial statements included in the 2009 Annual Report.
See accompanying notes to the unaudited condensed consolidated financial statements.

 
1

 

Onvia, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss  
   
Three Months Ended March 31,
 
   
2010
   
2009
 
   
(Unaudited)
 
   
(In thousands, except per share data)
 
             
Revenue
           
 Subscription
  $ 6,025     $ 4,991  
 Content license
    665       580  
 Management information reports
    218       263  
 Other
    79       53  
                 
Total revenue
    6,987       5,887  
                 
Cost of revenue
    1,064       1,225  
                 
Gross margin
    5,923       4,662  
                 
Operating expenses:
               
Sales and marketing
    3,782       3,480  
Technology and development
    900       734  
General and administrative
    1,240       1,081  
                 
 Total operating expenses
    5,922       5,295  
                 
Income / (loss) from operations
    1       (633 )
                 
Interest and other income, net
    16       2  
                 
Net income / (loss)
  $ 17     $ (631 )
                 
Unrealized gain on available-for-sale securities
    5       -  
                 
Comprehensive income / (loss)
  $ 22     $ (631 )
                 
Basic net income / (loss) per common share
  $ 0.00     $ (0.08 )
                 
Diluted net income / (loss) per common share
  $ 0.00     $ (0.08 )
                 
Basic weighted average shares outstanding
    8,284       8,248  
 
               
Diluted weighted average shares outstanding
    8,691       8,248  
 
See accompanying notes to the unaudited condensed consolidated financial statements.
 
 
 
2

 

Onvia, Inc.
Condensed Consolidated Statements of Cash Flows
   
Three Months Ended March 31,
 
   
2010
   
2009
 
   
(Unaudited)
 
   
(In thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income/(loss)
  $ 17     $ (631 )
Adjustments to reconcile net income / (loss) to net cash provided by operating activities:
         
Depreciation and amortization
    689       394  
Stock-based compensation
    (29 )     115  
Change in operating assets and liabilities:
               
Accounts receivable
    (709 )     545  
Prepaid expenses and other assets
    145       249  
Accounts payable
    (99 )     (212 )
Accrued expenses
    (354 )     (113 )
Unearned revenue
    547       943  
Deferred rent
    (20 )     (13 )
                 
Net cash provided by operating activities
    187       1,277  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Additions to property and equipment
    (312 )     (27 )
Additions to internal use software
    (1,012 )     (930 )
Purchases of investments
    (994 )     -  
Maturities of investments
    2,999       -  
Return of security deposits
    135       135  
                 
Net cash provided by / (used in) investing activities
    816       (822 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Principal payments on capital lease obligations
    (6 )     (31 )
Proceeds from exercise of stock options
    19       -  
                 
Net cash provided by / (used in) financing activities
    13       (31 )
                 
Net increase in cash and cash equivalents
    1,016       424  
                 
Cash and cash equivalents, beginning of period
    1,647       13,043  
                 
Cash and cash equivalents, end of period
  $ 2,663     $ 13,467  
                 
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
Unrealized gain on available-for-sale investments
  $ 5     $ -  
Issuance of treasury stock for 401K matching contribution
  $ -     $ (44 )
Property and equipment additions in accounts payable
  $ (276 )   $ -  
Internal use software additions in accounts payable
  $ (354 )   $ -  

See accompanying notes to the unaudited condensed consolidated financial statements.
 

 
3

 

Onvia, Inc.
Notes To Condensed Consolidated Financial Statements (Unaudited)

1.  
     Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Onvia, Inc. and its wholly owned subsidiary, collectively referred to as "Onvia" or “the Company.” There was no business activity in the subsidiary in the three month period ended March 31, 2010 or 2009. The unaudited interim condensed consolidated financial statements and related notes thereto have been prepared pursuant to accounting principles generally accepted in the United States of America, or GAAP, and the rules and regulations of the Securities and Exchange Commission, or SEC. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. The accompanying interim condensed consolidated financial statements and related notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2009 Annual Report on Form 10-K.

The information furnished is unaudited, but reflects, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.


2.  
     Use of Estimates

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

 
3.  
     Stock-Based Compensation and Stock Option Activity

The impact on Onvia’s results of operations of recording stock-based compensation was as follows for the periods presented (in thousands):

   
Three Months Ended
 
   
March 31,
 
   
2010
   
2009
 
Cost of sales
  $ (2 )   $ 5  
Sales and marketing
    (70 )     44  
Technology and development
    19       24  
General and administrative
    24       42  
                 
Total stock-based compensation
  $ (29 )   $ 115  

Stock-based compensation during the first quarter of 2010 includes the impact of options forfeited upon the departure of our Senior Vice President of Sales, which resulted in the reversal of approximately $89,000 in previously recognized expenses on forfeited options.

 
4

 
Since Onvia has a full valuation allowance for its deferred tax assets, there was no impact to its cash flows related to excess tax benefits associated with the provisions of Accounting Standard Codification 718, or ASC 718, Compensation – Stock Compensation (previously Statement of Financial Accounting Standards, or SFAS, No. 123R, Share-Based Payment).

Valuation Assumptions

Stock Options
Onvia calculated the fair value of each option award on the date of grant using the Black-Scholes valuation model. The following weighted average assumptions were used for options granted in each respective period:

   
Three Months Ended
 
   
March 31,
 
   
2010
   
2009
 
Risk-free interest rate
    2.60 %     1.82 %
Expected volatility
    49 %     47 %
Expected dividends
    0 %     0 %
Expected life (in years)
    5.5       5.1  

Employee Stock Purchase Plan (“ESPP”)
The fair value of each employee purchase under Onvia’s ESPP is estimated on the first day of each purchase period using the Black-Scholes valuation model. Purchase periods begin on May 1 and November 1 of each year.  No purchase periods commenced during the three months ended March 31, 2010 or 2009.

Stock Option Activity
The following table summarizes activity under Onvia’s equity incentive plan for the three months ended March 31, 2010:
 
   
Options Outstanding
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Term (in years)
   
Aggregate Intrinsic Value (1)
 
                         
Total options outstanding at January 1, 2010
    1,887,357     $ 8.48              
Options granted
    35,000                      
Options exercised
    (4,028 )                    
Options forfeited and cancelled
    (74,274 )                    
Total options outstanding at March 31, 2010
    1,844,055     $ 7.08       4.49     $ 3,452,888  
                                 
Options exercisable at March 31, 2010
    1,628,463     $ 6.98       4.01     $ 3,176,900  
Options vested and expected to vest at March 31, 2010
    1,822,852     $ 7.07       4.45     $ 3,428,166  
 
(1) Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of Onvia’s common stock of $8.01 at March 31, 2010 for options that were in-the-money at March 31, 2010. The number of in-the-money options outstanding and exercisable at March 31, 2010 was 952,701 and 851,602, respectively.

 
5

 
The weighted average grant date fair value of options granted during the three month periods ended March 31, 2010 and 2009 was $3.42 and $1.63 per option, respectively.

As of March 31, 2010, there was approximately $260,000 of unrecognized compensation cost related to unvested stock options and estimated purchases under the ESPP. That cost is expected to be recognized over a weighted average period of 1.39 years.

During the three months ended March 31, 2010, approximately $19,000 was received for exercises of stock options and purchases under the employee stock purchase plan. There were no exercises or purchases during the same period of 2009.

At the Board of Directors' discretion, option holders may be allowed to execute a “cashless exercise” of their vested options, whereby when issuing the underlying shares, the Company would withhold a number of shares sufficient in value to satisfy the exercise price of the option award. Further, at the Board of Directors’ discretion, the Company may withhold common shares sufficient in value to pay minimum tax withholding upon exercise of option holders stock options.

 
4.  
     Earnings per Share

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

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 31, 2010 and 2009 (in thousands, except per share data):

   
Three Months Ended March 31,
 
   
2010
   
2009
 
Net income / (loss)
  $ 17     $ (631 )
                 
Shares used to compute basic net income / (loss) per share
    8,284       8,248  
Dilutive potential common shares:
               
Stock options
    407       -  
Shares used to compute diluted net income / (loss) per share
    8,691       8,248  
Basic net income / (loss) per share
  $ 0.00     $ (0.08 )
Diluted net income / (loss) per share
  $ 0.00     $ (0.08 )
 
For the three months ended March 31, 2010, approximately 888,000 options to purchase shares of common stock with exercise prices greater than the average fair market value of our stock of $7.78, were not included in the calculation because the effect would have been anti-dilutive.
 
 
5.  
     Short-Term Investments

In accordance with ASC 320 Investments – Debt and Equity Securities (previously SFAS 115, Accounting for Certain Investments in Debt and Equity Securities), Onvia classifies short-term investments in debt securities as available-for-sale at March 31, 2010, stated at fair value as summarized in the following table:
 
 
6

 
 
   
March 31, 2010
 
   
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
U.S. Government backed securities
  $ 8,649     $ 3     $ (2 )   $ 8,650  
Certificate of deposit
    1,982       -       -       1,982  
    $ 10,631     $ 3     $ (2 )   $ 10,632  

Onvia accounts for short-term investments in accordance with ASC 820 Fair Value Measurements and Disclosures (previously SFAS No. 157, Fair Value Measurements), which defines fair value as the exchange price that would be received for an asset, or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Onvia uses the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The following table summarizes, by major security type, short-term investments classified as available-for-sale at March 31, 2010, stated at fair value:

   
Fair Value Measurements as of March 31, 2010
 
   
Level 1
   
Level 2
   
Level 3
   
Balance as of March 31, 2010
 
Description
                       
U.S. Government backed securities
  $ -     $ 8,650     $ -     $ 8,650  
Certificate of Deposit
    -       1,982       -       1,982  
    $ -     $ 10,632     $ -     $ 10,632  
 
6.  
     Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

   
March 31,
   
December 31,
 
   
2010
   
2009
 
Prepaid expenses
  $ 513     $ 673  
Interest and other receivable
    64       43  
    $ 577     $ 716  
 
 
7

 

7.  
     Property and Equipment

Property and equipment to be held and used consist of the following (in thousands):

   
March 31,
   
December 31,
 
   
2010
   
2009
 
             
 Computer equipment
  $ 3,334     $ 2,787  
 Software
    1,094       1,089  
 Furniture and fixtures
    99       99  
 Leasehold improvements
    735       710  
 
               
 Total cost basis
    5,262       4,685  
                 
 Less accumulated depreciation and amortization
    (3,649 )     (3,459 )
                 
 Net book value
  $ 1,613     $ 1,226  

Property and equipment includes $224,000 of property financed under capitalized leases as of December 31, 2009. These capital leases expired in March 2010.
 
8. 
     Accrued Expenses

Accrued expenses consist of the following (in thousands):

   
March 31,
   
December 31,
 
   
2010
   
2009
 
Payroll and related liabilities
  $ 784     $ 1,102  
State income, other taxes payable and other
    115       166  
    $ 899     $ 1,268  

9.  
     New Accounting Pronouncements
 
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2010, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, that are of significance, or potential significance to us.
 
In October 2009, the FASB issued Accounting Standards Update, or ASU, No. 2009-13, Multiple-Deliverable Revenue Arrangements. This ASU establishes the accounting and reporting guidance for arrangements including multiple revenue-generating activities. This ASU provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. The amendments in this ASU also establish a selling price hierarchy for determining the selling price of a deliverable. Significantly enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition. The amendments in this ASU are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, but early adoption is permitted. The Company will early adopt this ASU in the second quarter of 2010. Onvia is currently evaluating the impact of this adoption, however, the Company expects to record a larger portion of its multiple-deliverable arrangements upon delivery of certain elements under this new guidance.
 
 
8

 
 
10.  
     Commitments and Contingencies

Operating Leases

Onvia has a non-cancellable operating lease for its current corporate headquarters building, which expires in October 2015. Rent expense is being recognized on a straight-line basis over the term of the lease.  Onvia also has a non-cancellable operating lease for office equipment, which expires in July 2014.

As of March 31, 2010, remaining future minimum lease payments required on non-cancellable operating leases are as follows for the years ending December 31 (in thousands):
 
   
Real Estate
   
Office Equipment
   
Total
 
   
Operating Leases
   
Operating Lease
   
Operating Leases
 
                   
Remainder of 2010
  $ 696     $ 14     $ 710  
2011
    954       18       972  
2012
    983       18       1,001  
2013
    1,012       18       1,030  
2014
    1,042       11       1,053  
Thereafter
    894       -       894  
                         
    $ 5,581     $ 79     $ 5,660  
 
Purchase Obligations
 
Onvia has noncancellable purchase obligations for software development and license agreements, co-location hosting arrangements, telecom agreements, marketing agreements and third-party content agreements. The agreements expire in dates ranging from 2010 to 2012.  Future required payments under these non-cancellable agreements are as follows for the years ending December 31 (in thousands):
 
   
Purchase
 
   
Obligations
 
       
2010
  $ 1,362  
2011
    80  
2012
    7  
    $ 1,449  
 
Legal Proceedings

Class Action Securities Litigation
In 2001, five securities class action suits were filed against Onvia, certain former executive officers, and the lead underwriter of Onvia’s Initial Public Offering, or IPO, Credit Suisse First Boston, or CSFB.  The suits were filed in the U.S. District Court for the Southern District of New York on behalf of all persons who acquired securities of Onvia between March 1, 2000 and December 6, 2000.  In 2002, a consolidated complaint was filed. The complaint charged defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (and Rule 10b-5 promulgated thereunder) and Sections 11 and 15 of the Securities Act of 1933, for issuing a Registration Statement and Prospectus that failed to disclose and contained false and misleading statements regarding certain commissions purported to have been received by the underwriters, and other purported underwriter practices in connection with their allocation of shares in the offering.  The complaint sought an undisclosed amount of damages, as well as attorneys’ fees.  This action is being coordinated with approximately 300 other nearly identical actions filed against other companies.  At the Court’s request, plaintiffs selected six “focus” cases, which do not include Onvia.  The Court indicated that its decisions in the six focus cases are intended to provide strong guidance for the parties in the remaining cases.
 
 
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The parties in the coordinated cases, including Onvia’s case, reached a settlement.  The insurers for the issuer defendants in the coordinated cases will make the settlement payment on behalf of the issuers, including Onvia.  On October 5, 2009, the Court granted final approval of the settlement.  A group of three objectors to the settlement filed a petition to the Second Circuit seeking permission to appeal the District Court’s final approval order.  Plaintiffs filed an opposition to the petition.  Six notices of appeal to the Second Circuit have also been filed by different groups of objectors, including the objectors that filed the petition.  The time to file additional notices of appeal has run.  The briefing schedule for the appeals has not been set.
Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter.   If the settlement does not survive appeal and Onvia is found liable, we are unable to estimate or predict the potential damages that might be awarded, whether such damages would be greater than Onvia’s insurance coverage, and whether such damages would have a material impact on our results of operations or financial condition in any future period.

On October 2, 2007, Vanessa Simmonds, a purported stockholder of Onvia, filed suit in the U.S. District Court for the Western District of Washington against Credit Suisse Group, JPMorgan Chase & Co. and Bank of America Corporation, the lead underwriters of Onvia’s IPO in March 2000, alleging violations of Section 16(b) of the Securities Exchange Act of 1934. The complaint alleges that the combined number of shares of Onvia's common stock beneficially owned by the lead underwriters and certain unnamed officers, directors, and principal stockholders exceeded ten percent of its outstanding common stock from the date of Onvia’s IPO on March 2, 2000, through at least February 28, 2001. It further alleges that those entities and individuals were thus subject to the reporting requirements of Section 16(a) and the short-swing trading prohibition of Section 16(b), and failed to comply with those provisions. The complaint seeks to recover from the lead underwriters any "short-swing profits" obtained by them in violation of Section 16(b). Onvia was named as a nominal defendant in the action, but has no liability for the asserted claims. No directors or officers of Onvia are named as defendants in this action. On October 29, 2007, the case was reassigned to Judge James L. Robart along with fifty-four other Section 16(b) cases seeking recovery of short-swing profits from underwriters in connection with various initial public offerings. On February 25, 2008, Ms. Simmonds filed an Amended Complaint asserting substantially similar claims as those set forth in the initial complaint. Onvia waived service. On July 25, 2008, Onvia joined with 29 other issuers to file the Issuer Defendants' Joint Motion to Dismiss. Underwriter Defendants also filed a Joint Motion to Dismiss on July 25, 2008. Plaintiff filed oppositions to both motions on September 8, 2008. All replies in support of the motions to dismiss were filed on October 23, 2008. Oral argument on the motions to dismiss was held on January 16, 2009.  On March 12, 2009, the Court granted the Issuer Defendants' Joint Motion to Dismiss, dismissing the complaint without prejudice on the grounds that Ms. Simmonds had failed to make an adequate demand on Onvia prior to filing her complaint.  In its order, the Court stated it would not permit Plaintiff to amend her demand letters while pursuing her claims in the litigation.  Because the Court dismissed the case on the ground that it lacked subject matter jurisdiction, it did not specifically reach the issue of whether Plaintiff's claims were barred by the applicable statute of limitations.  However, the Court also granted the Underwriters' Joint Motion to Dismiss with respect to cases involving non-moving issuers, holding that the cases were barred by the applicable statute of limitations because the issuers' shareholders had notice of the potential claims more than five years prior to filing suit.
 
Ms. Simmonds filed a Notice of Appeal on March 31, 2009, and an Amended Notice of Appeal on April 10, 2009.  The underwriters subsequently filed a Notice of Cross-Appeal, arguing that the dismissal of the claims involving the moving issuers should have been with prejudice because the claims were untimely under the applicable statute of limitations. Ms. Simmonds' opening brief in the appeal was filed on August 26, 2009; Onvia and the underwriters’ responses and the underwriters' brief in support of their cross-appeal were filed on October 2, 2009; Ms. Simmonds' reply brief and opposition to the cross-appeal was filed on November 2, 2009; and the underwriters' reply brief in support of their cross-appeals was filed on November 17, 2009. Onvia does not currently believe that the outcome of this litigation will have a material adverse impact on its consolidated financial position and results of operations.  
 
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Other Litigation
In addition, from time to time the Company is subject to various other legal proceedings that arise in the ordinary course of business. While management believes that the disposition of these matters will not have a material adverse effect on the financial position, results of operations, or cash flows of the Company, the ultimate outcomes are inherently uncertain.
   
11.  
     Provision for Income Taxes

Onvia incurred net operating losses, or NOLs, from its inception through June 30, 2009, with net income in the first quarter of 2010, the third and fourth quarters of 2009 and the third quarter of 2007.  Because of this history of net operating losses, assuming net income is generated on a consistent basis, Onvia does not currently believe that the future realization of the tax benefit associated with these NOL carryforwards is more likely than not; therefore, Onvia has recorded a valuation allowance for the full amount of its net deferred tax assets.  Onvia will continue to evaluate the likelihood that these tax benefits may be realized, and may reverse all or a portion of its valuation allowance in the future if it is determined that realization of these benefits is more likely than not.

Utilization of the NOL carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred previously or that could occur in the future provided by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 of the Code, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.
 
Onvia plans to complete a Section 382 analysis regarding ownership changes that may have occurred, but at this time the Company cannot reasonably estimate the impact of such a change.  Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance.

12.  
     Security Deposits

Pursuant to Onvia’s lease for its current corporate office space, Onvia provided a security deposit of $538,000, which is reduced annually by $135,000 in the first three years of the lease beginning in March 2009, and by $45,000 on the fourth anniversary of the commencement date. The balance will be returned at lease termination in October 201.

13.  
     Subsequent Events

In May 2010, Michael Pickett, our Chief Executive Officer, President and Chairman of the Board, exercised 302,979 options.  Our Board of Directors authorized Mr. Pickett to surrender shares subject to the options to satisfy the exercise price of the options and the tax withholding obligations resulting from the exercise.  Mr. Pickett surrendered 171,330 options to satisfy the exercise price and the tax obligation.  The tax obligation associated with this exercise is approximately $427,000 and we expect to settle this tax obligation in May 2010.
 
Steven D. Smith announced his retirement from our Board of Directors effective May 7, 2010.  Mr. Smith’s retirement was not due to any disagreement with the Company’s management or the Board of Directors.

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


CAUTIONARY STATEMENT
 
The information set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, and is subject to the safe harbor created by those Sections. Factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in this section and later in this Report under Part II - Item 1A “Risk Factors,” and in “Part I - Item 1A - Risk Factors” in our 2009 Annual Report on Form 10-K. The following discussion should also be read in conjunction with the Consolidated Financial Statements and accompanying Notes thereto.

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

Company Overview
 
We are a leading provider of gBusiness information products and research tools that help companies plan, market and sell to targeted public sector buyers throughout the United States, or U.S.  The gBusiness market place is defined as the market funded by federal, state and local government spending.  Our products, proprietary databases and research tools, focus on federal, state, local and educational purchasing entities, and on early stage commercial and residential infrastructure projects.  Our information helps our clients proactively track which goods and services government agencies plan to purchase, what they actually purchase, and from whom they purchase.  This allows our clients to identify new market opportunities, analyze market trends, and obtain useful information about their competitors.  Historically, comprehensive market intelligence was only available to large companies with the resources to perform the research and store the data themselves, or companies that could afford to hire outside firms to perform the research for them.  Our processes, which collect and organize transactional information into actionable market intelligence, have enabled us to make this same high-value business intelligence affordable to businesses of all sizes.  We believe our business solutions provide our clients with a distinct competitive advantage and increased revenue.

Our  information products and research tools leverage our proprietary databases, which have been compiled for more than ten years, and include comprehensive, historical and real-time information on public sector and private sector infrastructure activities unavailable elsewhere in the marketplace. Our databases provide information on approximately 6 million procurement related records connected to over 275,000 companies from across approximately 89,000 government agencies and purchasing offices nationwide.  Thousands of records are standardized, added, formatted and classified within our database each day.

Transparency and open government initiatives continue to be a key topic for federal, state and local government officials.  In response to this market demand, we launched the website Recovery.org to provide visibility into how federal funds distributed under the American Recovery and Reinvestment Act are flowing into local communities.  As of April 30, 2010, www.Recovery.org was tracking more than 65,000 projects and an aggregate of $194 billion in government stimulus spending.  Recovery.org also attracted the attention of major business media during the year, including National Public Radio, CNN, BusinessWeek, Bloomberg and USA Today among others.  Our Recovery.org website and the recognition of major business media outlets have enhanced our position as an authoritative source for government spending information and analytics.

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

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

 
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Revenue from the sale of management information reports is recognized upon delivery of the report to the client, or, if report refreshes are included, ratably over the service period.  Pricing for management information reports is generally based on one, or a combination of, the following: the number of records included in the report; the geographic range of the report; or a flat fee based on the type of report.  We also generate revenue from document download services and list rental services, and these fees are recognized upon delivery of the document or list.
 
Onvia was incorporated in January 2000 in the state of Delaware. Our principal corporate office is located in Seattle, Washington. Our securities trade on The NASDAQ Capital Market under the symbol ONVI.

Industry Background

Since early 2009, government spending on goods and services has accelerated dramatically and now represents more than 40% of the GDP of the United States. Government spending on goods and services, or gBusiness, is one area of the economy that continues to see growth, and we believe this growth will continue for the foreseeable future.  Government is increasingly involved in business through spending, legislation, regulation, and public-private partnerships. The gBusiness marketplace exceeds $5 trillion in government expenditures annually, and continues to grow as the federal government becomes more involved in industries like energy, manufacturing, financial services and healthcare, among others.  Traditional government-sponsored job creation methods rely on investment in infrastructure to stem the unemployment rate, and ongoing state budget shortfalls will require tax increases in the coming years, resulting in even more government spending.  Progressive enterprises are recognizing the substantial opportunity and the significant challenges presented by this market and are developing their own gBusiness strategies to take advantage of this new revenue opportunity.  Businesses are now finding that they are competitively disadvantaged if they are not actively pursuing a gBusiness strategy.

Over 3.4 million businesses compete for opportunities within this highly competitive gBusiness marketplace and identifying qualified business partners and prospects is essential to a company’s success.  Identifying relevant projects and partners can be difficult and companies spend a substantial amount of time and effort to locate and research new partners and opportunities to grow their gBusiness segments. The Internet provides short-term visibility into government and private sector contracting information for both government agencies and businesses alike, but does not provide the on-demand intelligence required to guide strategic decisions.

Often, revenue opportunities are included within the specification documents behind the request for proposal, or RFP, and request for quote, or RFQ, documents. Without tools to quickly identify the pertinent information, businesses must read the entire RFP or RFQ to determine if it offers opportunities relevant to their business. Even after a new business opportunity is identified, many companies do not have enough information about the project to prequalify the opportunity, such as decision maker information, the purchasing history of the government agency or project owner, and who competes for similar projects.  This information is useful not only for companies contracting directly with the project owner, but also for subcontractors that would like to compete for work on awarded contracts. This information is rarely available from one source, and may not be available at all for historical projects.

 
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Our comprehensive databases contain much of this relevant decision making information on both a historical and real-time basis and thousands of records are added to our database each day.  Much of the information in our database is linked, so that clients can quickly research information relevant to a particular project in one centralized location. Clients can also perform customized searches on both the public record and within the project specification documents to identify relevant opportunities using any number of variables, such as publication date, geographic location and contract value, among others.  Using our database and tools, our clients spend less time on research and more time preparing winning proposals, establishing relationships, and executing contracts.

Products and Services

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

We leverage technology, tools and business processes to research, classify and publish actionable public and private sector opportunities from public and private sources. We link related records within our databases, prequalify business opportunities for clients based upon the client’s profile, and provide access to information in a timely manner, generally within 24 hours of release. Our database contains information on the largest industry verticals, with a focus on the infrastructure verticals, which include:
 
·  
Architecture and Engineering
·  
Construction and Building Supplies
·  
IT / Telecommunications
·  
Professional Services
·  
Operations and Maintenance Services
·  
Transportation
·  
Healthcare
·  
Water and Energy / Alternative Energy
 
Within these verticals we provide hard-to-find content, presented with a comprehensive view of a project throughout the most critical phases of the procurement lifecycle. These transactional records include:
 
·  
Advance Notices – alerts businesses of projects in the early stages of the development process, before the bid or RFP is released in its final form, or before final zoning and planning board approval;
·  
RFPs, RFQs, and related amendments;
·  
Planholders and Bidders Lists – provides competitive intelligence by presenting a list of competitors that have acquired plans, specifications, bidding documents and/or proposals for specific projects in the active bid or proposal stage, and a list of competitors who submit bids for prime contracts with the owner of the project;
·  
Bid Results and Awards Information – notifies businesses of awarded bids, providing information for use in their own sales and marketing activities; and
·  
Grants – supplies federal grant information critical to businesses tracking or applying for publicly-funded projects.
 
 
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Our business solutions are comprised of the following products:

The Onvia Online Database
The Onvia Online Database is our flagship gBusiness product and is intended to enable businesses of all sizes to effectively compete in the government procurement marketplace. This product provides rich search functionality on our proprietary database of local, state and federal government agency purchasing information. Users of the database can research project histories, agency purchasing trends, agency buyer contact information, agency relationships with existing vendors, contract awardees, and evaluate pricing for goods and services. Subscribers to the Onvia Online Database also receive customized daily email notifications about relevant business opportunities based upon their subscription profile.  The Onvia Online Database provides information necessary to qualify opportunities, improve decision making, prepare tailored bids, and manage agency relationships, all of which should improve the success rates of our clients in obtaining new procurement awards.

In February 2008, we expanded our business solutions to include information on the commercial and residential development market. This market intelligence information is comprehensive, covering the most populous 85 metropolitan areas within the United States. Our database of over 200,000 commercial and residential records provides a detailed overview of the commercial and residential marketplace. This market intelligence can be leveraged to identify business expansion opportunities and growth markets, evaluate overall market conditions, forecast demand for specific products and services, and align personnel and resources with future opportunities.  At the tactical level, this information helps companies identify upcoming projects and sales opportunities by monitoring land use planning and zoning information.  New and updated land use activities can be tracked with daily customized alerts delivered directly to our clients’ inboxes. Clients can research projects and the companies associated with each project, and track permit approval and project status as the engagement progresses.  The company and project information can be used to build relationships with corporate decision makers and planning officials to be in a good position to act upon future opportunities.

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

Management Information Reports

In addition to subscription services, we also offer a number of custom management information reports. These reports are generally one-time deliverables and revenue is recognized upon delivery, or, if report refreshes are included, ratably over the service period.
 
·  
Term Contracts – Provide clients with actionable sales information on term or continuing service contracts pending renewal at public agencies. These reports identify what contracts exist, when they are coming up for renewal, who the incumbent is and who the buyers are.  With this report, our clients are able to perform an early evaluation of the opportunity so they can be more competitive with their proposals to increase their public sector business.
·  
Contact Lists – Provide clients a comprehensive list of decision makers, agency procurement officers and zoning officials that can be used to develop relationships and identify potential business partners.
·  
Market Opportunity Reports – Provide clients with market intelligence needed for strategic planning and marketing, such as:
o  
Year-over-year growth rates by market or category to help understand buying trends;
o  
Market growth rates to assist in business planning;
o  
Distribution of state and local opportunities by sales territory to help allocate resources;
o  
Competitive analysis; and
o  
Seasonality and buying trends.
·  
Winning Proposals Library – Compare and contrast winning proposals submitted by competing firms in order to gain competitive insights.  Provides insight into how other companies position their qualifications and personnel, structure and format persuasive proposals, incorporate supporting materials, price goods and services, and differentiate themselves from their competitors.
 
 
 
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Executive Summary of Operations and Financial Position

We evaluate the following four key operating metrics, among others, to assist in the evaluation of our operating performance, and believe these metrics provide a means to compare our business with other businesses in the information industry.  These operating metrics are not financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to revenue or any other financial measures so calculated. We use this information as a basis for planning and forecasting core business activities for future periods and believe it is useful in understanding the results of our operations.

Annual Contract Value, or ACV
Annual contract value is the aggregate annual revenue value of our client base.  Growth in ACV demonstrates our success in increasing the number of high value clients and upgrading existing clients to new and higher valued products.
 
Number of Clients
Number of clients represents the number of individual businesses subscribing to our products.

Annual Contract Value per Client, or ACVC
Annual contract value per client is the annual contract value divided by the number of clients and indicates the average value of each of our subscriptions.

Quarterly Contract Value per Client, or QCVC
Quarterly contract value per client represents the average annual contract value of all new and renewing clients transacting during the quarter and is a leading indicator of future annual contract value per client.

For the quarter ended March 31, 2010, revenue was $7.0 million compared to $5.9 million in the same quarter of 2009, an increase of 19%.  Increasing demand for public sector information, particularly in the first half of 2009, contributed to this strong growth. Revenue also increased due to growth in ACV. At March 31, 2010 ACV grew to $24.4 million, up 1% compared to $24.1 million in the previous quarter, and up 17% compared to $20.9 million in the first quarter of 2009. 

While our year-over-year revenue results were strong, our sequential quarter performance slowed due to lower client retention rates, particularly with first-year clients. A year ago, optimism for the American Recovery and Reinvestment Act created demand for public sector information, which included many small companies that were new to this marketplace. We believe many of these first year clients were testing the public sector as a potential market and did not renew, which contributed to the quarter’s decline in retention rates. The state of the economy also continues to have a negative impact on overall client retention, particularly in the smaller business segments.

To fully take advantage of the growing gBusiness opportunity, we reorganized key sales leadership positions during the quarter and upgraded the expectations for our sales force, aggressively recruiting more experienced sales representatives to replace lower achieving team members.

We replaced 30% of our acquisition team and added 3 additional sales representatives to this team.  We ended the first quarter with 27 total sales representatives on the acquisition team, of which 10 were new.  We are continuing to upgrade this sales team and expect our sales force to be ramped as usual over the next 4-6 months.

 
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As part of our growth strategy we plan to launch our first new product since early 2008 by the end of our current quarter, which targets medium and large enterprises that require earlier and improved visibility into the future spending plans of government agencies.  The Onvia Spending Forecast Center is a searchable database of agency spending plans, covering all 366 Metropolitan Statistical Areas nationwide.  The spending plans, capital improvement plans and annual budgets included in the database represent more than 85% of government spending which can be accessed based on keyword, agency type and location, plan focus, etc.  Users of this tool will be able to understand budgets and projects months or years in advance to properly allocate resources internally, and identify key agency decision makers to win more business in a very competitive marketplace.

ACVC grew 5% from the previous quarter and 27% from the same year-ago period to an average of $3,119 per client. ACVC per client is the annual contract value divided by the number of clients and indicates the average value of each of our subscriptions. ACVC increased in the first quarter, in part by targeting higher value clients and emphasizing higher value database products. 

At March 31, 2010, the company’s total client base excluding the entry-level metropolitan product decreased 3% to 7,500 from 7,700 in the previous quarter and decreased 6% from 8,000 in the same year-ago period.  The sequential and year-over-year quarter decrease in the customer base is primarily attributed to a decline in the company’s client retention rates of first year, smaller clients.

Year-over-year, unearned revenue increased by 20% to $12.1 million at March 31, 2010, compared to $10.1 million at March 31, 2009.  The year-over-year increase is due to higher sales in the last 12 months compared to the same 12 months period in the prior year and a decrease in the number of sales with quarterly billing terms.  Unearned revenue is only recorded once the client is invoiced.
 
Quarterly contract value per client represents the average annual contract value of all new and renewing clients transacting during the quarter and is a leading indicator of future annual contract value per client.  In the first quarter of 2010, QCVC was $3,259, an increase of 23% compared to $2,647 in the first quarter of 2009. 

Our strategy is to continue to improve the relevance of information delivered to our customers through the development of improved tools and new, hard to find content.  By the end of June 2010, we expect to have most of our clients migrated to our new technology platform. Our new platform delivers distinctively powerful market intelligence through a more flexible and relevant interface to drive more value to our clients. By continuing to improve the relevance of information delivered to our clients, we expect to improve client satisfaction, thereby increasing retention rates, and broaden the appeal of our products to potential new categories of clients. These new platform capabilities, combined with our existing comprehensive databases on government procurement spending, are expected to support new product development and should continue to drive our growth and profitability well into the future.

Seasonality

Our customer acquisition business is subject to some seasonal fluctuations. The third quarter is generally our slowest quarter for customer acquisition. The construction industry is our single largest market and these prospects are typically engaged on projects during the summer months, not prospecting for new work, which causes new customer acquisition to decline compared to the other quarters in the year.  For this reason, it may not be possible to compare the performance of our business quarter to consecutive quarter, and our quarterly results and metrics should be considered on the basis of results for the whole year or by comparing results in a quarter with the results in the same quarter of the previous year.

 
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Results of Operations for the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009

The following table provides selected consolidated results of operations for the periods presented as a percentage of total revenue:

   
Three Months Ended March 31,
 
   
2010
   
2009
 
Revenue:
           
 Subscription
    86 %     85 %
 Content license
    10 %     10 %
 Management information reports
    3 %     4 %
 Other
    1 %     1 %
 Total revenue
    100 %     100 %
                 
Cost of revenue
    15 %     21 %
                 
Gross margin
    85 %     79 %
                 
Operating expenses:
               
 Sales and marketing
    54 %     59 %
 Technology and development
    13 %     12 %
 General and administrative
    18 %     18 %
                 
 Total operating expenses
    85 %     89 %
                 
Income / (loss) from operations
    0 %     (10 %)
Interest and other income, net
    0 %     0 %
                 
Net income / (loss)
    0 %     (10 %)

 
Revenue and Cost of Revenue
Revenue for the three months ended March 31, 2010 was $7.0 million, compared to $5.9 million for the same period in 2009. Revenue increased as a result of prior and current period increases in our ACV, which is attributable to increased adoption of our database products, and positive results from investments in our sales force and sales processes. The increase in revenue is explained in more detail under the “Executive Summary of Operations and Financial Position” section above.

Cost of revenue decreased to 15% of revenue for the three months ended March 31, 2010, compared to 21% for the three month period in 2009.  In total, cost of revenue was $1.1 million in the three month period in 2010, compared to $1.2 million for the same period in 2009, representing a decrease of $161,000, or 13% in 2010.

Our cost of revenue primarily represents payroll-related expenses associated with the research and aggregation of the data in our proprietary database and third-party content fees, but also includes credit card processing fees. The decrease for the comparable three month periods was primarily due to a decrease of $210,000 in payroll-related expenses, offset by an increase of $53,000 in third party content and revenue sharing costs. Payroll expenses decreased as a result of a decline in weighted average headcount in our content team to 38 during the first quarter of 2010, compared to 52 in the first quarter of 2009. Headcount decreased as a result of higher utilization of third-party content aggregation.  Third party content costs increased as a result of collecting a larger volume of high value content compared to last year.

 
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Sales and Marketing
Sales and marketing expenses increased in total to $3.8 million and decreased as a percentage of revenue to 54% in the three months ended March 31, 2010, compared to $3.5 million and 59% in the same period in 2009.

For the quarter ended March 31, 2010, sales and marketing expenses increased $302,000, or 9%, compared to the same period in 2009.  The increase is primarily comprised of $228,000 increase in payroll related expenses due to higher headcount, $191,000 in allocated expenses, $184,000 increase in marketing costs, and $131,000 in severances. Weighted average headcount in our sales and marketing teams was 100 during the three months ended March 31, 2010, compared to 92 in the same period in 2009. The increase in allocated expenses was due to increased amortization from internal use software and software licenses related to the new technology platform. These increases were partially offset by a decrease of $333,000 in commission expenses due to higher acquisition sales in the first quarter of 2009, and $114,000 decrease in stock compensation expenses due to forfeiture of options upon the departure of our Senior Vice President of Sales.

Technology and Development
For the three months ended March 31, 2010, technology and development expenses were $900,000 and 13% of revenue, compared to $734,000 and 12% of revenue in the same period in 2009.

For the comparable three month periods, technology and development expenses increased $166,000, or 23%.  The increase in expenses is attributed to an increase of $80,000 in amortization from internal use software and software licenses related to the new technology platform and an increase of $48,000 in contract labor as a result of increased utilization of offshore technical resources. Weighted average headcount in our technology and development teams was 18 during the three months ended March 31, 2010, compared to 19 in the same period in 2009.

General and Administrative
For the three months ended March 31, 2010, general and administrative expenses were $1.2 million or 18% of revenue, compared to $1.1 million or 18% of revenue, in the same period in 2009.  For the comparable three month periods, general and administrative expenses increased $159,000, or 15% in 2010 compared to 2009.  The increase is primarily related to an increase of $135,000 in payroll related costs due to increase in headcount, an increase of $70,000 in contract labor expenses, and an increase in allocated expenses of $69,000. Weighted average headcount in this group was 17 during the three months ended March 31, 2010 and 12 for the same period in 2009. These increases were offset by a decrease of $74,000 in business taxes and a decrease of $66,000 in travel and entertainment expenses.

Interest and Other Income, Net
Net interest and other income was $16,000 for the three months ended March 31, 2010, compared to $2,000 for the same periods in 2009. Interest expense is immaterial for the three months ended March 31, 2010 and 2009.

Net Income (Loss) and Net Income (Loss) per Share
We reported net income of $17,000 for the three months ended March 31, 2010, compared to net losses of $631,000 in the same period in 2009.  The decrease in net loss resulted primarily from the increase in revenues as discussed above. On a diluted per share basis, net income was breakeven for the three months ended March 31, 2010, respectively, compared to net loss of $0.08 for the same period in 2009.
 
Critical Accounting Policies and Management Estimates

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from our estimates. In addition, any significant unanticipated changes in any of our assumptions could have a material adverse effect on our business, financial condition, and results of operations.

 
19

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

Our subscription services and management information reports are also sold together as a bundled offering.  Pursuant to the provisions of ASC 605-25 Revenue Recognition, we allocate revenue from these bundled sales ratably between the subscription services and the management reports based on their relative fair values, which are consistent with established list prices for those offerings.

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

Internal Use Software
We account for the costs to develop or obtain software for internal use in accordance with ASC 350-40, Intangibles – Goodwill and Other Subtopic Internal-Use Software (previously Statement of Position, or SOP, No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use).  As a result, we capitalize qualifying computer software costs incurred during the “application development stage” and other costs as permitted ASC 350-40. Amortization of these costs begins once the product is ready for its intended use.  These costs are amortized on a straight-line basis over the estimated useful life of the product, typically 3 to 5 years.  The amount of costs capitalized within any period is dependent on the nature of software development activities and projects in each period.  We capitalized $871,000 in internal use software costs during the three months ended March 31, 2010, compared to $930,000, during the same period in 2009. Amortization related to capitalized software was $498,000 for the three months ended March 31, 2010, compared to $205,000 in the same period in 2009. During the first quarter of 2010, we revised the estimated useful life of capitalized software costs as a result of plans to modify our existing website. Reducing the estimated useful life of these costs resulted in an increase of $20,000 in amortization costs during the first quarter of 2010.

Stock-Based Compensation
We account for stock-based compensation according to the provisions ASC 718, Compensation – Stock Compensation (previously SFAS No. 123R, Share-Based Payment), which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of stock-based compensation cost over the requisite service period for awards expected to vest. The fair value of our stock options is determined using the Black-Scholes valuation model.  Such value is recognized as expense over the service period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including employee class and historical experience. There is also significant judgment required in the estimation of the valuation assumptions used to determine the fair value of options granted.  Please refer to the discussion of valuation assumptions in Note 3 of the “Notes to Condensed Consolidated Financial Statements” of this Report for additional information on the estimation of these variables.  Actual results, and future changes in estimates, may differ substantially from our current estimates.

 
20

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

We periodically evaluate our long-lived assets for impairment in accordance with ASC 360-40, Property, Plant, and Equipment – Impairment or Disposal of Long-Lived Assets (previously SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets). ASC 360-40 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to not be recoverable. If events or circumstances indicate that any of our long-lived assets might be impaired, we will analyze the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, we will record an impairment loss to the extent that the carrying value of the asset exceeds the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.  No property and equipment was impaired during the three months ended March 31, 2010 or 2009.

Income taxes
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for net operating loss, or NOL, carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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

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

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

Accounts Receivable and Allowance for Doubtful Accounts
We record accounts receivable for the invoiced portion of our enterprise contracts and content license agreements once we have a signed agreement and amounts are billable under the contract.  All of our subscription contracts are non-cancellable upon activation.We do not record an asset for the unbilled or unearned portion of our enterprise contracts or content licenses.  Accounts receivable are recorded at their net realizable value, after deducting an allowance for doubtful accounts.  Such allowances are determined based on a review of an aging of accounts and reflect either specific accounts or estimates based on historical incurred losses.  If the financial condition of our clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required, and our ability to recognize sales to certain clients may be affected.
 
 
21

 
Contractual Obligations

Future required payments under operating leases excluding operating expenses, and other purchase obligations as of March 31, 2010 are as follows for the periods specified (in thousands):

   
Payments due by period
 
   
Total
   
Less than 1 year
   
1 - 3 years
   
3 - 5 years
   
More than
5 years
 
Real estate operating lease obligations
  $ 5,581     $ 933     $ 1,951     $ 2,069     $ 628  
Purchase obligations (1)
    1,449       1,382       67       -       -  
Office equipment operating lease obligations
    79       18       37       24       -  
Total
  $ 7,109     $ 2,333     $ 2,055     $ 2,093     $ 628  

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


Liquidity and Capital Resources
 
Our principal sources of liquidity are cash, cash equivalents and short-term investments. Our combined cash and cash equivalents and short term investments were $13.3 million at March 31, 2010, and our working capital was $2.3 million. At March 31, 2010 we held $10.6 million in FDIC insured or U.S. government backed short-term investments. From December 31, 2009 to March 31, 2010, our cash and cash equivalents increased by $1.0 million mostly due to maturity of $3.0 million of short term investments and $0.2 million in positive cash flow from operations explained below. These increases were offset by investing $1.0 million in internal use software, $0.3 million in property and equipment, and $1.0 million in short-term investments.

During three months ended March 31, 2010, we generated positive cash flow from operations of $0.2 million which was 1.1 million lower than the same period of 2009.  This decline was due to flat sales volume, offset by higher operating expenses.

If the continuing slowdown in the economy results in higher default rates on client contracts or lower client retention rates, our operating cash flow may be adversely impacted in the near term; however, we believe that our current cash and cash equivalents are sufficient to fund current operations for the near-term foreseeable future.

In May 2010, Michael Pickett, our Chief Executive Officer, President and Chairman of the Board, exercised 302,979 options.  Our Board of Directors authorized Mr. Pickett to surrender shares subject to the options to satisfy the exercise price of the options and the tax withholding obligations resulting from the exercise.  Mr. Pickett surrendered 171,330 options to satisfy the exercise price and the tax obligation.  The tax obligation associated with this exercise is approximately $427,000 and we expect to settle this tax obligation in May 2010.

 
22

 
Operating Activities
Net cash provided by operating activities was $0.2 million for the three months ended March 31, 2010, compared to $1.3 million in the same period in the prior year. The decrease in operating cash flow results from the payment of executive incentive compensation of $156,000 and decrease in cash collections during the first half of the quarter as a result of slower sales due to the restructuring of the sales management team. Sales transactions accelerated in March compared to the previous two months which affected the timing of cash receipts in the quarter.

Investing Activities
Net cash provided by investing activities was $0.8 million in the three months ended March 31, 2010, compared to net cash used in investing activities of $0.8 million in the same period in 2009. We purchased $1.0 million in short term investments during the first three months of 2010, while $3.0 million of short term investments matured as of March 31, 2010. Purchases of property and equipment increased by $285,000 in the first quarter of 2010 compared to the same period in 2009. In addition $135,000, a portion of our security deposit on the lease for our corporate headquarters, was returned to us in March 2010.

Financing Activities
Net cash provided by financing activities was $13,000 in the three months ended March 31, 2010, compared to net cash used in financing activities of $31,000 in the three months ended March 31, 2009.  The increase in cash provided is primarily due to proceeds from stock option exercises and lower payments under capital lease obligations in the first three months of 2010.

Recent Accounting Pronouncements
 
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2010, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, that are of significance, or potential significance to us.
 
In October 2009, the FASB issued Accounting Standards Update, or ASU, No. 2009-13, Multiple-Deliverable Revenue Arrangements. This ASU establishes the accounting and reporting guidance for arrangements including multiple revenue-generating activities. This ASU provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. The amendments in this ASU also establish a selling price hierarchy for determining the selling price of a deliverable. Significantly enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition. The amendments in this ASU are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, but early adoption is permitted. We will early adopt this ASU in the second quarter of 2010.  We are currently evaluating the impact of this adoption, however, we expect to record a larger portion of our multiple-deliverable arrangements upon delivery of certain elements under this new guidance.

 
23

 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The disclosures under this Item are not required for smaller reporting companies.

Item 4(T). Controls and Procedures

Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s, or SEC, rules and forms.  Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Changes in Internal Control over Financial Reporting

In January 2010, we integrated a new revenue recognition module and a new credit card processing module into our accounting system.  These new modules will allow for the automation of order entry and payment processing based on contract details entered at the time of service setup.  Management has implemented new internal controls to monitor the accuracy of transactions processed through these new modules.  We believe these new controls, in combination with existing controls, will be sufficient to meet the reasonable assurance requirements of this section.

Except as noted above, there were no other changes in our internal control over financial reporting during the quarter ended March 31, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 
24

 

           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

The information set forth under “Legal Proceedings” in Note 10, “Commitments and Contingencies”, of the notes to our unaudited condensed consolidated financial statements of this Report is incorporated herein by reference.

Item 1A.  Risk Factors

The pre-existing risk factors described below should be read in conjunction with the risk factors and information disclosed in our 2010 Annual Report.

 
·
Risks related to our growth strategy
 
o  
Weakness in the U.S. economy and in the commercial-residential housing market specifically, could drive reduced spending by our clients and prospective clients on business intelligence services
o  
Continued weakness in the U.S. economy may negatively impact our client retention rates
o  
We may not be able to meet projected renewal rates
o  
We may be required to increase sales and marketing expenses in order to achieve revenue goals
o  
We may not be able to increase subscribership to high value products
o  
We may fail to attract, hire and retain sales associates who can effectively communicate the benefits of our   products to our clients, and they may be unable to achieve expected sales targets
o  
If we cannot effectively satisfy our clients across all targeted industry verticals, we may decide to target fewer industries and, as a result, may lose clients
o  
Our competitors may develop similar technologies that are more broadly accepted in the marketplace
o  
Rapid advances in technology and new mediums for distributing information may diminish the value of our service offerings
o  
We may not be able to increase our market penetration into the medium to large business segments

 
·
Risks related to our new product strategy

o  
We may fail to introduce new content and products that are broadly accepted by clients and there may be delays in the introduction of these tools and products
o  
We may be unable to control the cost of ongoing content collection or the cost of collecting new content types to support new product offerings
o  
We may improperly price our new product offerings for broad client acceptance
o  
We may overestimate the value of sales intelligence to companies in the infrastructure marketplace

 
·
Financial, economic and market risks

o  
We may be required to withhold common shares to cover tax withholding upon exercise of    certain executive stock options and settle the obligations with the Internal Revenue Service, which would negatively impact our cash flow in the future
o  
We may not be able to generate recurring positive cash flows from operations
o  
Our quarterly financial results are subject to fluctuations that may make it difficult to forecast future performance
o  
We implemented anti-takeover provisions that may discourage takeover attempts and depress the market price of our stock
 
 
25

 
 
 
·
Operational risks

o  
We may not effectively implement new technologies and new product functionality could fail to perform as designed
o  
System failures could cause an interruption in the services of our network and impact our ability to compile information and deliver our product to our clients
o  
Our current technology infrastructure and network software systems may be unable to accommodate our anticipated growth, and we may require a significant investment in these systems to accommodate performance and storage requirements of new and planned products
o  
We may be unable to retain the services of executive officers, directors, senior managers and other key employees, which would harm our business
o  
Political, social or environmental conditions in off-shore locations may impact the collection and delivery of our content and/or development of new products
o  
We may be unable to effectively monitor and prevent unauthorized redistribution of our published information
o  
Our services and products depend upon the continued availability of licensed technology from third parties and we may not be able to obtain those licenses on commercially reasonable terms, or at all
o  
Increased blocking of our emails could negatively impact client satisfaction with our product and could inhibit the effectiveness of our marketing efforts
o  
    We may be required to withhold common shares to cover tax withholding upon exercise of certain executive stock options and settle the obligations with the Internal Revenue Service, which would negatively impact our cash flow in the future.
o  
     Increased sales to clients who are new to the public sector may impact our first year retention rates in 2010
 
 
·
Regulatory, judicial or legislative risks
 
o  
Any settlement or claim awarded against us in our ongoing litigation matters could negatively impact our operating results
o  
Future regulations could be enacted that either directly restrict our business or indirectly impact our business by limiting the growth of e-commerce
o  
Our access to new content from governmental entities and other third parties may be restricted if bid aggregation on the Internet is restricted by law or regulations
o  
Utilization of our net operating loss, or NOL, carryforwards may be subject to annual limitations provided by the Internal Revenue code

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 5.  Other Information
 
Michael Pickett has informed Onvia's Board of Directors that he intends to retire as President and CEO of Onvia by December 31, 2011, subject to placement of a new CEO. Mr. Pickett will continue to serve as Chairman of the Board and provide transitional leadership as needed through December 31, 2011.
 
 
26

 

Item 6.  Exhibits

Number
Description
   
3.1
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3(i).1 to the Form 10-Q for the quarter ended June 30, 2004, filed on August 12, 2004)
   
3.2
Bylaws of Onvia (incorporated by reference to Exhibit 3.2 to the Form 10-K for the year ended December 31, 2000, filed on  April 2, 2001)
   
4.1
Form of Onvia’s Common Stock Certificate (incorporated by reference to the Registration Statement on Form S-1 dated December 21, 1999, as amended (File No. 333-93273))
   
4.2
Form of Rights Agreement between the Company and U.S. Stock Transfer Corp. as a Rights Agent (including as Exhibit A the form of Certificate of Designation, Preferences and Rights of the Terms of the Series RP Preferred Stock, as Exhibit B the form of the Right Certificate, and as Exhibit C the Summary of Terms of Rights Agreement) (incorporated by reference to Exhibit 4.1 from the Form 8-K, filed on November 25, 2002)
   
10.1*
Onvia, Inc. 2008 Equity Incentive Plan (incorporated by Reference to the 2008 Proxy Statement filed on August 4, 2008)
   
10.2*
Amended Onvia, Inc. Savings and Retirement Plan (incorporated by reference to Exhibit 10.1 from the Form 10-K for the year ended December 31, 2004, filed on March 25, 2005)
   
10.3*
Form of Indemnification Agreement between Onvia and each of its officers and directors (incorporated by reference to Exhibit 10.1 the Registration Statement on Form S-1 filed on December 21, 1999 (File No. 333-93273))
   
10.4*
Amended 2000 Employee Stock Purchase Plan (incorporated by Reference to Exhibit 10.4 to the Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 14, 2008)
   
10.5*
2000 Directors’ Stock Option Plan (incorporated by reference to Exhibit 10.26 to the Registration Statement on Form S-1/A filed on February 2, 2000 (File No. 333-93273))
   
10.6*
Third Amendment to Employment and Noncompetition Agreement with Michael D. Pickett dated September 27, 2002 (incorporated by reference to Exhibit 10.2 to the Report on Form 10-Q for the quarter ended September 30, 2002, filed on November 6, 2002)
   
10.7*
Employment Agreement with Irvine N. Alpert dated February 22, 2002 and Commission and Bonus Plan with Irvine N. Alpert dated September 11, 2001 (incorporated by reference to Exhibit 10.4 to the Report on Form 10-K for the year ended December 31, 2001, filed on March 29, 2002)
   
10.8*
Medical Dental Building Lease Agreement between Onvia and GRE 509 Olive LLC, dated July 31, 2007 (incorporated by reference to Exhibit 10.12 to the Report on Form 10-Q for the period ended September 30, 2007, filed on November 14, 2007)
   
10.9*
2010 Management Incentive Plan (incorporated by reference to Exhibit 10.10 to the Report on Form 10-K for the period ended December 31, 2009, filed on March 31, 2010)
   
10.10*
Separation and Release Agreement with Michael J. Tannourji, dated February 5, 2010 (incorporated by reference to Exhibit 10.11 to the Report on Form 10-K for the period ended December 31, 2009, filed on March 31, 2010)
   
10.11*
2010 Variable Compensation Plan for Irvine N. Alpert (incorporated by reference to Exhibit 10.12 to the Report on Form 10-K for the period ended December 31, 2009, filed on March 31, 2010)
   
10.12*
2010 Variable Compensation Plan for Michael S. Balsam (incorporated by reference to Exhibit 10.13 to the Report on Form 10-K for the period ended December 31, 2009, filed on March 31, 2010)
   
10.13*++
Second Amendment to 2000 Employee Stock Purchase Plan (incorporated by Reference to Exhibit 10.15 to the Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 14, 2008)
   
31.1++
Certification of Michael D. Pickett, Chairman of the Board, Chief Executive Officer and President of Onvia, Inc., Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2++
Certification of Cameron S. Way, Chief Financial Officer of Onvia, Inc., Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1++
Certification of Michael D. Pickett, Chairman of the Board, Chief Executive Officer and President of Onvia, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
32.2++
Certification of Cameron S. Way, Chief Financial Officer of Onvia, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 
* Executive Compensation Plan or Agreement
 
++ Filed Herewith


 
27

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

                                      ONVIA, INC.
 
 
 
 
                                      By:  /s/ Michael D. Pickett
                                          ------------------------------
                                           Michael D. Pickett
                                           Chairman of the Board, President and
                                           Chief Executive Officer
 
 

                                      By:  /s/ Cameron S. Way
                                          ------------------------------
                                           Cameron S. Way
                                           Chief Financial Officer

Date:  May 17, 2010

 
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