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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

For the transition period from                     to                    

Commission File Number 000-29609

ONVIA.COM, INC.

(Exact Name of Registrant as Specified in its Charter)

1260 Mercer Street, Seattle, Washington 98109

(Address of Principal Executive Offices)

(206) 282-5170

(Registrant’s Telephone Number, Including Area Code)

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

None

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

Common Stock, $.0001 Par Value Per Share

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. Yes x    No ¨

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ¨    No x

The aggregate market value of the voting and nonvoting stock held by nonaffiliates of the registrant based on the closing price on March 1, 2003 as reported on the NASDAQ National Market, was approximately $9,645,995(1). The aggregate market value of the voting and nonvoting stock held by non-affiliates of the registrant, based on the closing price on June 28, 2002, as reported on the NASDAQ National Market, was $7,084,179(1) .

The number of shares of the registrant’s common stock outstanding at March 1, 2003 was 7,663,792.

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ONVIA.COM, INC.

FORM 10-K

For the Year Ended December 31, 2002

INDEX

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PART I

CAUTIONARY STATEMENT

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

ITEM 1.    BUSINESS

Overview

Onvia is a leading business-to-government (B2G) notification service for government agency buyers and business suppliers. The Onvia network alerts business suppliers of government contracts and helps government agencies inform and update suppliers electronically. Our network manages the distribution and report of bid requests from government agencies nationwide in the $600 billion federal, state and local government marketplace.

Our service makes it more efficient for companies of all sizes and industries to access and compete for these government opportunities. Business suppliers no longer have to scour newspapers, trade periodicals, or the Internet in search of government opportunities. Customers are automatically notified of and updated on government opportunities that match their business profile.

Our network efficiently matches government agency bid requests to suppliers of the requested commodity or service, saving time and money for agencies and businesses alike. Government agencies reduce costs by streamlining the bid process and create a larger and more diverse pool of suppliers. Increased bid competition drives costs down for government agencies, as well as lowering marketing and administrative expenses. Government suppliers can more efficiently keep up to date with public sector projects.

Agencies and suppliers also have access to our bid library that contains thousands of expired bids issued within the last 2 years. Information in our bid library helps agencies save time preparing new bid opportunities, and suppliers can use this library to analyze purchasing trends, identify potential future customers and access federal award information.

Onvia delivered positive results in 2002 and created the foundation for improved performance in 2003.

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Key components of our strategy in 2003 are to further establish our leadership position and expand our market penetration in the B2G market, as well as achieve our current projections for cash flow profitability. Our current projection for cash flow profitability is the end of the second quarter of 2003. This guidance on cash flow profitability is dependent upon market adoption of our new premium award and bid pipeline information products over the next few months. If market adoption is less than our expectation, cash flow profitability could be delayed.

Our common stock trades on The NASDAQ National Market System under the symbol ONVI.

Industry Background

Government agencies spend over $600 billion annually on the procurement of a large array of goods and services. In an era of budget deficits, government agencies are pursuing methods of reducing the costs of procurement. Costs can be reduced through a more competitive bidding environment for procurement contracts and by reducing the cost of the bid notification and proposal process. The use of the Internet for the distribution of information can greatly improve the efficiency and timeliness of this process. Many organizations are adopting various Internet-focused strategies aimed at improving operating efficiencies and communications with trading partners and customers.

Two market segments that can greatly benefit from the Internet and online communication are businesses and government agencies. The Internet can improve profitability for both buyers and sellers with the appropriate choice of various Internet products and services. Businesses of all sizes can explore new sales opportunities and establish closer relationships with government purchasers through the Internet. The cross-section of these two market segments is one of great potential, given the substantial purchasing power existing between these markets.

The Government Procurement Market Opportunity

Procurement between businesses and government agencies, known as business-to-government, or B2G commerce, is a substantial market and is highly fragmented. The complexity in this market is due in part to the large number of government agencies and suppliers, the differing processes among agencies, and their significant obstacles to adopting advanced technologies and communication tools. According to the U.S. Census Bureau there were 87,849 local government agencies in the United States in 2002. The total local government agency figure is comprised of 3,034 counties, 19,431 municipalities, 16,506 townships, 13,522 school districts and 35,356 “special districts” which include focused agencies such as power districts and housing authorities.

According to the U.S. Small Business Administration, state and local government organizations spent over $375 billion on goods and services in 1998 ranging from fleet maintenance parts to major construction projects. At the federal level, contracts for services have been increasing. According to the U.S. General Accounting Office, in 1999, services represented the largest single contract category with a 43% share and total contract value of $78 billion, overshadowing both supply and equipment purchases.

Most businesses are continually striving to find new opportunities to maintain business growth. Public sector projects provide these businesses with reliable income, especially during difficult economic times.

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Businesses with limited operational resources sometimes find it difficult to stay notified of government contracts that match their business.

Government agencies are challenged to make contract opportunities available to existing and potential new vendors to attract competing bids. Historically this process has taken place through expensive and time consuming traditional methods such as mailings, newspaper listings, postings in agency buildings or more recently, online and offline bid aggregation companies. The paperwork required for these processes can make government contracting frustrating for both the agency and its potential vendors.

The Internet and other technological advancements in hardware and software can ease many of these challenges. Automated processes can ease the process and reduce the costs to notify vendors of upcoming opportunities and to keep them updated of active projects. Electronic notification can also reduce the amount of time government suppliers devote to tracking new and current public sector projects.

Onvia’s Business Solution

Our solution is designed to meet the needs of businesses and government agencies. Through Onvia, businesses obtain leads for government contracting opportunities at the federal, state and local level. Our targeted solutions facilitate and enhance the relationship between businesses and their government agency customers.

Suppliers spend considerable time and resources discovering new government business opportunities and benefit from a service that aggregates and automates the searching and matching process for government leads.

Government buyers are faced with inefficient notification systems, which require significant paperwork and high costs associated with the procurement process. Our solution provides them with reduced operating costs, increased administrative efficiency, heightened competition and a network that enables them to notify businesses online.

As a recognized leader in the B2G market, we have been able to develop a unique set of proprietary tools and resources that include both supplier-side and buyer-side components. As the standard through which businesses and government agencies do business online, the goal of our B2G solution is to connect new and existing government suppliers with business opportunities from government agencies. The size and strength of our network allows suppliers and agencies to find better matches quickly, saving time and money.

As the leading source of government business opportunities for suppliers, we aggregate government leads from around the nation and provide suppliers with The Onvia Guide. The Onvia Guide provides subscribing suppliers with a daily listing of government business leads personalized for each supplier by their location and business category selections.

Our direct relationship with government agencies provides agencies with a suite of buyer tools that enable agency buyers to quickly create Requests for Proposals (RFPs), Request for Quotes (RFQs), and other requests for bids. In addition to lists and endorsements for direct marketing, the agency relationships provide a direct connection between suppliers and buying agencies, providing suppliers with bid documents and online response tools.

Product Description

Onvia’s Agency Solution

Onvia’s agency tools automate the process of RFP and RFQ creation, posting and document distribution. By providing agencies with online tools for creating templates for RFPs and RFQs, we help agencies eliminate many manual steps in the bidding process and increase the overall efficiency of their procurement process.

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Onvia’s buyer tools consist of BidWire and QuoteWire. BidWire is a web-based tool set that provides agency buyers with a step-by-step template for creating and posting RFPs and other requests for bids. All posted bids are coded by the buyer and distributed to subscribing suppliers and supplemental agency suppliers. Some of BidWire’s features also include bid document distribution services and tools to update open RFPs and view a list of suppliers who have downloaded bid documents.

QuoteWire provides buyers requesting quotes with the same efficiencies as BidWire does for RFPs. All posted RFQs are coded by the buyer and distributed to subscribing suppliers and supplemental agency suppliers. Some of QuoteWire’s primary features include tools that allow the buyer to modify standard RFQ forms and create individual line items for each quote; a specialized version of the RFQ form whereby suppliers can input prices and other information; automatic tabulation of seller responses for comparison and award; and specific award notification to the selected supplier.

Our buyer tools provide agency buyers with numerous benefits. The online tools eliminate many manual steps traditionally found in the RFP and RFQ process. Agencies save time and money by outsourcing the bid package production and distribution to us. Also, by posting bids and quotes to a database of suppliers, buyers increase the number of businesses competing for their projects, which can drive contract prices down.

Onvia’s Government Supplier Solution

The business purpose of Onvia’s supplier tools is to provide government suppliers with real time access to procurement opportunities and bid specification documents and blueprints. Because our valuable solution is centralized into one online location, our customers are able to operate much more efficiently. Our database of new government revenue opportunities are organized by industry vertical and geography to better serve the specific needs of each subscriber.

Suppliers can subscribe to any combination of our Demandstar by Onvia service or The Onvia Guide publication to obtain government revenue opportunities quickly and cost-effectively. Our Demandstar by Onvia platform provides real-time RFP and RFQ postings from participating government agencies through our Bidwire and Quotewire tools. Also, subscribers can download bid documents directly from the network, saving time and money. Non-subscribers can also review new postings to the network, which offers them the ability to look for postings from specific agencies.

The Onvia Guide is an excellent alternative or complement to our Demandstar by Onvia offering. The Onvia Guide is a daily e-mail publication of business leads from more than 50,000 government-purchasing offices. The leads published daily to each subscriber are customized based upon the selected locations and categories of the customer.

During 2002, we solicited feedback from our customers to better understand how they value our services and what type of new products would provide them with additional value. As a result, we identified and introduced new value-added products including:

The new premium data products requested by our customers include post-award information and pre-award bid data. The post-award information offers additional revenue opportunities for many suppliers and most specifically subcontractors. The pre-award bid data offers additional advantages to our subscribers that are interested in participating in the development of the bids and RFPs.

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Strategy

We intend to continue to enhance our position as an electronic notification and document distribution service. Key elements of our strategy, which collectively aim to strengthen our competitive market position and financial performance, include:

Acquisitions

In 2001, we completed an acquisition of certain assets of ProjectGuides, Inc., as well as the acquisition of DemandStar.com, Inc. ProjectGuides focused on the seller side B2G platform, and DemandStar.com on the buyer

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side B2G platform, which has enabled us to establish a competitive position in the B2G market. The integration of both platforms was completed in September of 2001.

DemandStar.com, Inc.

In March 2001, we completed the acquisition of DemandStar.com, Inc., a leading provider of B2G e-commerce solutions. The acquisition provided us with a proven buyer side B2G platform, a well recognized set of online buyer tools and more than 270 signed agency buyers.

ProjectGuides, Inc.

In June 2001, we completed the acquisition of certain assets of ProjectGuides, Inc., one of the nation’s largest online bid gathering and distribution services. The assets included proprietary technology capable of aggregating large numbers of government requests for bids and quotes, as well as a sophisticated team of research associates responsible for the daily bid aggregation efforts. This acquisition established us as a leading provider of government bid and quote opportunities to businesses in the United States. Furthermore, it expanded our reach into the construction vertical—the largest market for government contracting at all levels—and encouraged our expansion into additional industry verticals.

The acquisition also allowed us to dramatically and cost-effectively increase the flow of bids through our online network, giving suppliers access to construction-related opportunities from public agencies at the local, state and federal levels. This acquisition helped us to deliver approximately 99,000 leads to our supplier network in 2001. In 2002, we delivered over 285,000 leads to our subscribers, a 188% increase over the prior year.

Customers

We serve two primary and distinct customer groups: businesses and government agencies.

Businesses

Government suppliers must undertake basic business development efforts to effectively compete for and win government contracts. A key element of these efforts is the successful discovery of available government business. Suppliers spend a significant amount of time and expense researching their markets for government sales leads. To maximize the value of their time and decrease the time spent on non-billable efforts, suppliers require a product that saves time and money.

Compared to traditional methods of finding leads for government business, our system not only saves time and money, but it is simple to use and has a variety of delivery mechanisms. We have developed highly efficient technology and business processes to gather and publish leads from more than 50,000 purchasing offices in all 50 states. By coding all aggregated leads and matching customers to leads through each customer’s profile, we automate the process. This makes it easier for suppliers to review and evaluate leads quickly. We can search further and wider than most suppliers can, illuminating sales opportunities that otherwise would not have been found.

Customers are delivered new leads via email on a daily basis. Published as The Onvia Guide, a professionally formatted lead report is personalized for each unique subscriber. It eliminates the need for suppliers to actively search out sources so customers no longer have to spend time searching multiple newspapers or making phone calls. Therefore, other subscriptions can be terminated and time normally spent on searching can be converted to billable hours or more productive sales efforts.

Our products level the playing field for small businesses, equipping them with the benefits of large and sophisticated sales and marketing research tools, improving their competitive position.

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Government Agencies

Although many government agencies maintain long-term supplier relationships, the agencies still must publicize contract opportunities to both existing and potential suppliers. By using our solution, government agencies save time and money through the increased distribution of their RFPs and RFQs. In addition, the agency relationships provide a direct connection between suppliers and buying agencies, providing suppliers with bid documents and online response tools.

Sales Strategy

The primary objectives of our sales strategy are to increase our number of premium subscribers, and to continue to secure relationships with influential government agencies.

Supplier Sales.    Direct marketing provides leads for the inbound and outbound sales teams. Our inbound team receives incoming calls from direct marketing respondents and educates potential customers on the costs and benefits of our services. Our outbound team tracks leads and places outbound calls to convert non-subscribers, who are allowed to use the system to review new postings to the nework, into paying subscribers. In 2002 we reorganized our outbound sales team and divided it into three distinct teams targeting three separate size opportunities to better service our customers. The three teams are the Corporate Accounts team, the Major Accounts team and the Single Seat team. Each of these teams manages opportunities to ensure that the prospect receives the appropriate level of service and suite of product for the size of the prospect’s organization. By understanding our prospects before placing the call, our sales team can present solutions quickly and accurately.

Agency Relationships.    As of December 31, 2002, we had signed and activated approximately 400 government agencies nationwide. These relationships were established in key metropolitian areas such as the Silicon Valley, CA, Orlando, FL and Dallas, TX; with jurisdictions such as the City of San Jose and Sunnyvale, CA, City of San Antonio Purchasing, Housing Authority and Water System, TX, the City of Orlando and City of Sarasota, as well as the County of Sarasota. We will leverage our current partnerships to continue to secure additional relationships with government agencies.

Marketing Strategy

We target our marketing efforts towards the estimated one million businesses in the United States that currently contract for government work. We target vendors from participating agencies for our DemandStar product, and businesses in a variety of verticals for our Onvia Guides product. We acquire leads for our in-house sales force through direct marketing, including direct mail and e-mail.

In 2002, we focused our marketing efforts on generating leads to acquire higher value customers. These businesses range from small, localized architectural and engineering firms to larger nationwide construction companies.

We also devote significant marketing efforts towards generating repeat business from current or past customers. Marketing campaigns were engaged to increase the geographical coverage for current subscribers and reactivate expired accounts. In the past year, we also devoted additional resources toward customer retention in an effort to increase customer satisfaction and renewal rates.

Customer Service

We are strongly committed to a high level of customer service to increase customer satisfaction as a means to ensure retention and expansion of our customer base. Accordingly, in the past year we devoted additional resources toward the development of a well-trained customer service organization to assist and support customers via phone or email for our suite of products.

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Technology

We support our operations and online solutions using an advanced technology platform designed to serve a large and rapidly increasing volume of web traffic in a reliable and efficient manner without critical failures. We designed our own proprietary core systems for customer interaction, web site design and hosting systems. Our systems have been designed to:

Our systems use a combination of proprietary technologies and commercially available licensed technologies. The backbone of our technology infrastructure consists of database servers running on Microsoft SQL Server 2000 database with Compaq hardware. The front end consists of multiple redundant web servers that are expandable as operations grow. We designed the system to scale easily to support rapid growth, as well as to sustain multiple failures by various components without downtime.

Our web servers, database servers, transaction-processing servers and other core systems that conduct essential business operations are housed at our corporate headquarters in Seattle, Washington. Our network operations personnel provide 24x7 monitoring and engineering support in a climate-controlled and physically secure environment. Our onsite data center has redundant communications lines from multiple Internet connectivity providers and has its own emergency power and backup systems. We also house all non-critical systems such as development servers, quality assurance servers, and internal network servers at our headquarters in Seattle.

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

Operations

We help businesses succeed by aggregating demand and providing a network where they can:

In order to provide these valuable solutions we must develop and maintain stable and secure operational processes. We believe that by continuing to provide additional solution functionality online to our users, by continuing to enhance our transactional processing capabilities and by continuing to improve our customer experience, we will significantly grow our B2G network.

Our online network enables government agencies to communicate their needs for any product or service the agency may require to qualified suppliers of the product or service. We formulate this need into a lead that is then filtered and routed to qualified suppliers of the product or service. Suppliers within our marketplace can evaluate the lead, respond to the agency with a quote, or request more information. A stronger and deeper relationship with all levels of government agencies is established for the vendors as part of this process.

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Competition

The market for Internet-based products and services in the B2G arena is evolving and competitive. Competitors include Internet-based and traditional providers of B2G products and services to government agencies and businesses, our primary target markets.

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

We may face additional competition in the future as well-funded companies look to develop new Internet-based product and service offerings in the B2G arena. The markets we compete in have relatively low barriers of entry, providing other companies with opportunities to quickly become more formidable competitors. In order to compete successfully, we must increase the value proposition of our products to create a loyal, recurring base of customers and agency users. To achieve this we must continually enhance our content and sources.

We believe that the principal competitive factors affecting our market include, but are not limited to, content, product quality and features, base of existing customers, base of active agencies, and customer service. In order to excel at these principal competitive factors more so than other competitors in our industry, we intend to maintain a superior understanding of our target customers, develop and strengthen relationships with new and existing agencies, offer superior value in our content and service offerings and sustain a more efficient operating model. We believe that our current product and service offerings compare favorably to similar service offerings available in the market today. The success of our business model hinges on key market assumptions, any one of which may not prove to be true, including the following:

Intellectual Property Rights

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

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

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We presently have no issued U.S. patents or U.S. patent applications pending and we have no current intention to file any U.S. patent applications. It is possible that we may not develop proprietary products or technologies that are patentable and that the patents of others will seriously harm our ability to do business.

We have registered trademarks in the United States for Onvia, the Onvia checkmark logo, DemandStar.com, DemandStar, Megadepot, Just Think What You Can Build, Quotewire, and Bidwire, and have filed a trademark application for e-Journal of Commerce. We also have trademark applications in Canada for Onvia, Onvia.com, and the Onvia checkmark logo. The trademark applications mentioned above are subject to review by the applicable governmental authority, may be opposed by private parties and may not issue.

Employees

As of March 1, 2003, we had 106 full-time employees working in the following departments: 56 in sales and marketing, 17 in research included in cost of sales, 23 in technology and development and 10 in general and administrative.

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

Risk Factors

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

We may be unable to maintain our listing on NASDAQ, which could cause our stock price to fall and decrease the liquidity of Onvia’s common stock

We previously received a delisting notification from NASDAQ due to NASDAQ’s $1.00 minimum bid price requirement. On July 17, 2002, the effective date of our 1-for-10 reverse stock split, Onvia’s stock closed at $2.15 and in the range of $2.05 and $2.58 during the following 10 consecutive trading days, exceeding NASDAQ’s $1.00 threshold, and on August 2, 2002 we received notification from NASDAQ that we had regained compliance with the Market’s listing requirements. Onvia’s stock traded in the range of $1.71 and $3.13 from August 2, 2002, the date of the NASDAQ notification, through March 3, 2003, with a closing price of $2.62 on March 3, 2003. If our common stock is delisted from trading on the NASDAQ National Market as a result of subsequent listing requirement violations and is neither relisted thereon nor listed for trading on the NASDAQ SmallCap Market, trading in our common stock may continue to be conducted on the OTC Bulletin Board or in a non-NASDAQ over-the-counter market, such as the “pink sheets”. Delisting of our common stock would result in limited release of the market price of the common stock and limited news coverage of Onvia and could restrict investors’ interest in the common stock. Also, a delisting could materially and adversely affect the trading market and prices for our common stock and our ability to issue additional securities or to secure additional financing. In addition, if our common stock were not listed and the trading price of the common stock was less than $5 per share, our common stock could be subject to Rule 15g-9 under the Securities Exchange Act of 1934 which, among other things, requires that broker/dealers satisfy special sales practice requirements, including making individualized written suitability determinations and receiving a purchaser’s written consent prior to any transaction. In such case, Onvia’s common stock could also be deemed to be a “penny stock” under the Securities Enforcement and Penny Stock Reform Act of 1990, which would require additional disclosure in connection with trades in the common stock, including the delivery of a disclosure schedule explaining the nature and risks of the penny stock market. Such requirements could severely limit the liquidity of Onvia’s common stock.

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Our 1-for-10 reverse stock split may negatively impact our stock price and future operations and may threaten Onvia’s continued listing on the NASDAQ market

The 1-for-10 reverse stock split, which was effective upon the beginning of trading on July 17, 2002, reduced the total liquidity of Onvia’s stock. This reduced liquidity could have a negative impact on the price of our stock. The reduced number of shares, in combination with a lower stock price, could put Onvia at risk of violating the NASDAQ minimum market value requirement.

Our stock price is very volatile

The market price of Onvia’s common stock has fluctuated significantly and is expected to continue to fluctuate significantly in response to various factors, including:

In addition, the stock market in general, and the NASDAQ National Market and the market for Internet and technology companies in particular, have experienced extreme price fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry conditions may materially and adversely affect our stock price, regardless of our operating performance.

Our principal stockholders, officers and directors own a controlling interest in our voting stock

Onvia’s officers, directors and stockholders with greater than 5% holdings beneficially own approximately 50.6% of our outstanding common stock. Under the rules of the Securities and Exchange Commission, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options, warrants, or other convertible securities. As a result of this majority ownership, these stockholders, acting together, will have the ability to control substantially all matters submitted to our stockholders for approval, including:

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These stockholders and directors have substantial influence over Onvia’s management and its affairs.

The exercise of employee stock options could have a dilutive effect on current stockholders

In January 2003, our Board of Directors approved a one-time aggregate stock option grant of 400,000 options to active employees, excluding certain executives. The grant was based on an analysis of employee ownership in related industries. Our analysis revealed that, prior to the additional grant, Onvia was significantly below industry norms for employee participation in equity ownership. The additional grants vest ratably over a period of 48 months and contain provisions for accelerated vesting if certain change of control transactions occur. The exercise of a significant number of these options could have a dilutive effect to current stockholders and could negatively impact the price of Onvia’s stock.

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

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

In addition, on November 22, 2002, our Board of Directors adopted a Stockholders Rights Agreement, designed to protect stockholder interests in the event of an unsolicited takeover attempt by distributing one Preferred Stock Purchase Right for each outstanding share of Common Stock.

The cash distribution to our stockholders may negatively impact Onvia’s future operations and, consequently, our stock price

Our business has not yet generated retained earnings from which to pay dividends. However, in March, 2002, our Board of Directors approved a cash distribution of $3.90 per share to return excess capital to our stockholders. The distribution, in the amount of $29.9 million, occurred on May 3, 2002. The cash distribution may not leave us with adequate cash to pursue unidentified future merger and acquisition activities, to meet our lease obligations over the entire term of our lease if we do not reduce or eliminate this obligation, or to achieve our profitability goals.

Uncertainty in the commercial real estate market in Seattle may harm our chances of eliminating the monthly lease payments on our idle office space

We currently have approximately 78,000 square feet of idle office space in the Seattle area. As a result of the continuing economic slowdown, the current market for commercial real estate in Seattle is depressed. We have recorded a liability sufficient to cover our remaining lease obligations through 2010 under the assumption that we will be able to sublease this space at estimated current market rates in mid-2004 through the remainder of the lease terms. If the commercial real estate market in Seattle remains depressed and we are unable to eliminate or reduce the monthly lease payments on our idle office space, our business, operating results and financial condition would be harmed.

We may fail to develop and market comprehensive, efficient, cost-effective and secure electronic access to public information and new products and services

Our success depends in part upon our ability to rapidly establish our own products and services as the standard used by businesses that transact with governmental entities and agencies in the United States. In order to

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increase revenue in the future, we must continue to develop products and services that businesses, governments and citizens will find valuable, and there is no guarantee that we will be able to do so. If we are unable to develop products and services that allow us to attract, retain and expand our current subscriber base, our revenues and future operating results may be harmed. We cannot ensure that our products and services will appeal to a sufficient number of Internet users to generate continued revenue growth.

We may lose the right to the content that we distribute, which is provided to us entirely by governmental entities

We do not own or create the governmental content distributed to our vendors in the form of request for proposal and related information. We do not have an exclusive right to this content and we cannot ensure that these data sources will continue to be available in the future. Governmental entities could terminate their contracts to provide data or restrict the distribution of such data. The loss or the unavailability of our data sources in the future, or the loss of our right to distribute some of the data sources, would harm our business, operating results and financial condition.

We may not be able to maintain adequate bid flow to our customers if governmental agencies collectively reduce spending

If at any time governmental agencies reduce spending for an extended period of time, there may be a shortage of procurement bids flowing through our B2G network. If we cannot provide an adequate supply of government procurement bids to our subscribing suppliers, these customers may not renew their subscription to the service. The loss of our current and future subscribing suppliers would harm our business, operating results and financial condition.

Our ability to distribute bid flow and to effectively market to our cus