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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A



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



FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004



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



Commission file number 000-50507



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KINTERA, INC.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 74-2947183                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                    |  |           
|--------------------------------------------------- |  | ----------
|9605 Scranton Road, Suite 240 San Diego, California |  | 92121     
|(Address of principal executive offices)            |  | (Zip Code)



Registrants
telephone number, including area code: (858) 795-3000



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Securities registered pursuant to Section 12(b) of the Act:

None



Securities registered pursuant to Section 12(g) of the Act:

Common Stock

(Title of Class)



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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 whether the registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2)    Yes  x    No ̈



As of November 8, 2004 there were 28,633,600
shares of the registrants common stock outstanding.



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EXPLANATORY NOTE



This Amendment No. 1 on Form 10-Q/A to our Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2004, filed with the Securities and Exchange Commission (the SEC) on November 15, 2004, is being filed solely for the purpose of amending Part I, Item 4. Controls and Procedures to clarify that there was no change in
our internal controls during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



This Amendment No. 1 on Form 10-Q/A does not reflect events
occurring after the filing of the Quarterly Report on Form 10-Q on November 15, 2004, or modify or update the disclosure presented in the original Quarterly Report on Form 10-Q, except to reflect the revisions as described above.



KINTERA, INC.



FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

INDEX



|                              |  |                                                                                                                                                                    |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --
|                              |  | Page                                                                                                                                                              
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                                                   
|Item 1.                       |  | Financial Statements                                                                                                                                               |  |   
|                              |  |                                                                                                                                                                   
|                              |  | Consolidated Balance Sheets at September 30, 2004 (unaudited) and December 31, 2003                                                                                |  | 3 
|                              |  |                                                                                                                                                                   
|                              |  | Consolidated Statements of Operations for the Three Months Ended September 30, 2004 and 2003 and for the Nine Months Ended September 30, 2004 and 2003 (unaudited) |  | 4 
|                              |  |                                                                                                                                                                   
|                              |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (unaudited)                                                            |  | 5 
|                              |  |                                                                                                                                                                   
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                                                                             |  | 6 
|                              |  |                                                                                                                                                                   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                              |  | 14
|                              |  |                                                                                                                                                                   
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                         |  | 26
|                              |  |                                                                                                                                                                   
|Item 4.                       |  | Controls and Procedures                                                                                                                                            |  | 26
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                                                                   
|                              |  |                                                                                                                                                                   
|Item 1.                       |  | Legal Proceedings                                                                                                                                                  |  | 27
|                              |  |                                                                                                                                                                   
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                        |  | 27
|                              |  |                                                                                                                                                                   
|Item 6.                       |  | Exhibits                                                                                                                                                           |  | 28



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PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



Kintera, Inc.

Condensed Consolidated Balance Sheet

(in thousands, except share data)



|                                                                                                                                                                                         |  |                   |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                         |  | September 30,2004 |         |   | December 31,2003 |  
|                                                                                                                                                                                         |  | (unaudited)       |         |   |                  |  
|Assets                                                                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Current assets:                                                                                                                                                                          |  |                   |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                |  | $                 | 11,728  |   |                  | $ | 38,480  |  
|Marketable securities                                                                                                                                                                    |  |                   | 35,027  |   |                  |   | 192     |  
|Accounts receivable, net of allowance for doubtful accounts of $390 and $195 at September 30, 2004 and December 31, 2003,
respectively                                                   |  |                   | 4,845   |   |                  |   | 1,933   |  
|Accounts receivable from related party                                                                                                                                                   |  |                   |        |   |                  |   | 475     |  
|Prepaid expenses and other current assets                                                                                                                                                |  |                   | 1,157   |   |                  |   | 736     |  
|Note receivable from employee                                                                                                                                                            |  |                   | 16      |   |                  |   | 19      |  
|Total current assets                                                                                                                                                                     |  |                   | 52,773  |   |                  |   | 41,835  |  
|Property and equipment, net                                                                                                                                                              |  |                   | 2,317   |   |                  |   | 1,458   |  
|Software development costs, net                                                                                                                                                          |  |                   | 1,284   |   |                  |   |        |  
|Other assets                                                                                                                                                                             |  |                   | 236     |   |                  |   | 769     |  
|Intangible assets, net                                                                                                                                                                   |  |                   | 9,986   |   |                  |   | 3,695   |  
|Total assets                                                                                                                                                                             |  | $                 | 66,596  |   |                  | $ | 47,757  |  
|                                                                                                                                                                                         |  |                  
|Liabilities and stockholders equity                                                                                                                                                     |  |                   |         |   |                  |   |         |  
|Current liabilities:                                                                                                                                                                     |  |                   |         |   |                  |   |         |  
|Accounts payable and accrued expenses                                                                                                                                                    |  | $                 | 2,038   |   |                  | $ | 1,693   |  
|Accrued salaries and employee benefits                                                                                                                                                   |  |                   | 968     |   |                  |   | 703     |  
|Donations payable to customers                                                                                                                                                           |  |                   | 3,519   |   |                  |   | 799     |  
|Line of credit                                                                                                                                                                           |  |                   | 6       |   |                  |   | 361     |  
|Deferred revenue                                                                                                                                                                         |  |                   | 3,249   |   |                  |   | 1,931   |  
|Notes payable                                                                                                                                                                            |  |                   | 126     |   |                  |   |        |  
|Note payable to founder                                                                                                                                                                  |  |                   | 18      |   |                  |   | 45      |  
|Total current liabilities                                                                                                                                                                |  |                   | 9,924   |   |                  |   | 5,532   |  
|Deferred rent                                                                                                                                                                            |  |                   | 132     |   |                  |   | 72      |  
|Others                                                                                                                                                                                   |  |                   | 25      |   |                  |   |        |  
|                                                                                                                                                                                         |  |                  
|Stockholders equity:                                                                                                                                                                    |  |                   |         |   |                  |   |         |  
|                                                                                                                                                                                         |  |                  
|Preferred stock, $.001 par value, 20,000,000 shares authorized at September 30, 2004 and December 31, 2003, no shares issued and outstanding
at September 30, 2004 and December 31, 2003 |  |                   |        |   |                  |   |        |  
|Common stock, $.001 par value, 60,000,000 shares authorized; 28,604,643 and 23,748,564 shares issued and outstanding at September 30, 2004 and
December 31, 2003, respectively           |  |                   | 28      |   |                  |   | 24      |  
|Additional paid-in capital                                                                                                                                                               |  |                   | 115,010 |   |                  |   | 86,820  |  
|Deferred compensation                                                                                                                                                                    |  |                   | (11,138 | ) |                  |   | (10,863 | )
|Accumulated other comprehensive loss                                                                                                                                                     |  |                   | (183    | ) |                  |   |        |  
|Accumulated deficit                                                                                                                                                                      |  |                   | (47,202 | ) |                  |   | (33,828 | )
|Total stockholders equity                                                                                                                                                               |  |                   | 56,515  |   |                  |   | 42,153  |  
|Total liabilities and stockholders equity                                                                                                                                               |  | $                 | 66,596  |   |                  | $ | 47,757  |  



See accompanying notes
to unaudited consolidated financial statements.



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KINTERA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                 |  |                                 |        |   |                                 |   |        |      |  |   |         |   |  |   |        |  
|------------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                 |  | Three months endedSeptember 30, |        |   | Nine months ended September 30, |  
|                                                 |  | 2004                            |        |   | 2003                            |   |        | 2004 |  |   | 2003    |  
|Net revenue                                      |  | $                               | 7,001  |   |                                 | $ | 2,207  |      |  | $ | 15,965  |   |  | $ | 5,152  |  
|Cost of revenue                                  |  |                                 | 1,997  |   |                                 |   | 424    |      |  |   | 3,771   |   |  |   | 1,011  |  
|Gross profit                                     |  |                                 | 5,004  |   |                                 |   | 1,783  |      |  |   | 12,194  |   |  |   | 4,141  |  
|                                                 |  |                                 |        |  
|Sales and marketing                              |  |                                 | 4,482  |   |                                 |   | 1,936  |      |  |   | 11,300  |   |  |   | 5,620  |  
|Product development and support                  |  |                                 | 1,686  |   |                                 |   | 841    |      |  |   | 5,345   |   |  |   | 2,394  |  
|General and administrative                       |  |                                 | 2,061  |   |                                 |   | 377    |      |  |   | 5,527   |   |  |   | 1,280  |  
|Stock-based compensation                         |  |                                 | 1,380  |   |                                 |   | 978    |      |  |   | 3,663   |   |  |   | 1,860  |  
|Total operating expenses                         |  |                                 | 9,609  |   |                                 |   | 4,132  |      |  |   | 25,835  |   |  |   | 11,154 |  
|                                                 |  |                                 |        |  
|Operating loss                                   |  |                                 | (4,605 | ) |                                 |   | (2,349 | )    |  |   | (13,641 | ) |  |   | (7,013 | )
|                                                 |  |                                 |        |  
|Interest income (expense) and other, net         |  |                                 | 142    |   |                                 |   | (6     | )    |  |   | 269     |   |  |   | 4      |  
|                                                 |  |                                 |        |  
|Net loss                                         |  | $                               | (4,463 | ) |                                 | $ | (2,355 | )    |  | $ | (13,372 | ) |  | $ | (7,009 | )
|                                                 |  |                                 |        |  
|Basic and diluted net loss per share             |  | $                               | (0.17  | ) |                                 | $ | (0.23  | )    |  | $ | (0.55   | ) |  | $ | (0.75  | )
|                                                 |  |                                 |        |  
|Weighted average shares  basic and diluted      |  |                                 | 26,301 |   |                                 |   | 10,184 |      |  |   | 24,218  |   |  |   | 9,363  |  
|                                                 |  |                                
|                                                 |  | Three months endedSeptember 30, |        |   | Nine months endedSeptember 30,  |  
|                                                 |  | 2004                            |        |   | 2003                            |   |        | 2004 |  |   | 2003    |  
|Stock-based compensation includes the following: |  |                                 |        |   |                                 |   |        |      |  |   |         |   |  |   |        |  
|                                                 |  |                                 |        |  
|Sales and marketing                              |  | $                               | 928    |   |                                 | $ | 669    |      |  | $ | 2,375   |   |  | $ | 1,176  |  
|Product development and support                  |  |                                 | 231    |   |                                 |   | 215    |      |  |   | 624     |   |  |   | 556    |  
|General and administrative                       |  |                                 | 221    |   |                                 |   | 94     |      |  |   | 664     |   |  |   | 128    |  
|                                                 |  |                                 |        |  
|                                                 |  | $                               | 1,380  |   |                                 | $ | 978    |      |  | $ | 3,663   |   |  | $ | 1,860  |  



See accompanying notes
to unaudited consolidated financial statements.



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KINTERA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                            |  |                                |         |   |      |   |        |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------ | -
|                                                                            |  | Nine months endedSeptember 30, |        
|                                                                            |  | 2004                           |         |   | 2003 |  
|Operating activities:                                                       |  |                                |         |   |      |   |        |  
|Net loss                                                                    |  | $                              | (13,373 | ) |      | $ | (7,009 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                |         |   |      |   |        |  
|Bad debt expense                                                            |  |                                | 81      |   |      |   | 55     |  
|Depreciation                                                                |  |                                | 724     |   |      |   | 442    |  
|Amortization of software development costs                                  |  |                                | 54      |   |      |   |       |  
|Amortization of intangible assets                                           |  |                                | 662     |   |      |   | 346    |  
|Forgiveness of employee note                                                |  |                                | 3       |   |      |   | 28     |  
|Interest expense associated with issuance of warrant                        |  |                                | 83      |   |      |   |       |  
|Stock-based compensation expense                                            |  |                                | 233     |   |      |   | 156    |  
|Amortization of deferred compensation                                       |  |                                | 3,473   |   |      |   | 1,740  |  
|Changes in operating assets and liabilities, net of acquisitions:           |  |                                |         |   |      |   |        |  
|Accounts receivable                                                         |  |                                | 581     |   |      |   | (899   | )
|Prepaid expenses and other current assets                                   |  |                                | (415    | ) |      |   | 87     |  
|Accounts payable and accrued expenses                                       |  |                                | (1,779  | ) |      |   | 472    |  
|Accrued salaries and employee benefits                                      |  |                                | (256    | ) |      |   | 4      |  
|Donations payable to customers                                              |  |                                | 2,249   |   |      |   | 1,767  |  
|Customer deposits                                                           |  |                                | (744    | ) |      |   |       |  
|Deferred revenue                                                            |  |                                | 1,312   |   |      |   | 1,091  |  
|Notes payable                                                               |  |                                | (241    | ) |      |   |       |  
|Deferred rent                                                               |  |                                | 60      |   |      |   | (13    | )
|Sponsorships payable                                                        |  |                                |        |   |      |   | (137   | )
|Net cash used in operating activities                                       |  |                                | (7,293  | ) |      |   | (1,870 | )
|                                                                            |  |                               
|Investing activities:                                                       |  |                                |         |   |      |   |        |  
|Purchases of marketable securities                                          |  |                                | (39,004 | ) |      |   |       |  
|Sales and maturities of marketable securities                               |  |                                | 3,987   |   |      |   | 2,145  |  
|Acquisition costs, net of cash acquired                                     |  |                                | (1,653  | ) |      |   | (138   | )
|Purchases of property and equipment                                         |  |                                | (1,195  | ) |      |   | (303   | )
|Additions to software development costs                                     |  |                                | (1,181  | ) |      |   |       |  
|Other assets                                                                |  |                                | 569     |   |      |   | (1,028 | )
|Net cash provided by (used in) investing activities                         |  |                                | (38,477 | ) |      |   | 676    |  
|                                                                            |  |                               
|Financing activities:                                                       |  |                                |         |   |      |   |        |  
|Draw on line of credit obligation                                           |  |                                |        |   |      |   | 311    |  
|Payment of line of credit obligation                                        |  |                                | (391    | ) |      |   | (69    | )
|Payment of employee note                                                    |  |                                | (45     | ) |      |   |       |  
|Proceeds from exercise of common stock options and ESPP                     |  |                                | 930     |   |      |   | 7      |  
|Repurchase of common stock                                                  |  |                                |        |   |      |   | (5     | )
|Net proceeds from sale of preferred stock                                   |  |                                |        |   |      |   | 5,491  |  
|Net proceeds from sale of common stock                                      |  |                                | 18,524  |   |      |   |       |  
|Net cash provided by financing activities                                   |  |                                | 19,018  |   |      |   | 5,735  |  
|Net increase (decrease) in cash and cash equivalents                        |  |                                | (26,752 | ) |      |   | 4,541  |  
|Cash and cash equivalents at beginning of period                            |  |                                | 38,480  |   |      |   | 1,235  |  
|Cash and cash equivalents at end of period                                  |  | $                              | 11,728  |   |      | $ | 5,776  |  
|                                                                            |  |                               
|Supplemental disclosure of cash flow information:                           |  |                                |         |   |      |   |        |  
|Cash paid for interest                                                      |  | $                              | 14      |   |      | $ |       |  
|                                                                            |  |                               
|Supplemental disclosure of non-cash investing and financing activities:     |  |                                |         |   |      |   |        |  
|Issuance of common stock and options for acquisitions                       |  | $                              | 10,148  |   |      | $ | 5,860  |  



See accompanying notes
to unaudited consolidated financial statements.



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Kintera, Inc.

Notes to Unaudited Consolidated Financial Statements

(dollars in thousands, except share data)



1. Organization and Summary of Significant Accounting Policies



Description of Business



Kintera, Inc. (the Company) was incorporated in the state of Delaware on February 8, 2000. The Company is a provider of software that enables nonprofit
organizations to use the Internet to increase donations, reduce fundraising costs and build awareness and affinity for an organizations cause by bringing their employees, volunteers and donors together in online, interactive communities.



Basis of Presentation



The accompanying unaudited condensed consolidated financial statements of the Company have
been prepared in accordance with U.S. generally accepted accounting principles in the United States of America and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments
considered necessary for a fair presentation, consisting only of normal and recurring adjustments. All significant intercompany transactions have been eliminated in consolidation. Operating results for the three and nine months ended September 30,
2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2003.



In November 2003, the Companys Board of Directors and stockholders
approved a two-for-one reverse stock split of the outstanding shares of common and preferred stock. All share and per share information included in these consolidated financial statements have been adjusted to reflect the impact of the reverse stock
split.



Use of Estimates



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



Principles of Consolidation



The consolidated financial statements include the accounts of the Company and all
wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.



Concentration of Credit Risk and Significant Customers



The Company had one customer that comprised 14% of net revenues for the nine months ended September 30, 2003.



Revenue Recognition



The Company primarily generates revenue from Kintera Sphere, its wealth profiling business, its awareness campaign business and other services and products offered by
Kintera.



Kintera Sphere, is an enterprise-grade software system that
integrates a suite of features including content management, contact management, communication, commerce, community and reporting. The Company receives revenues for upfront fees, monthly maintenance fees and transaction fees tied to the donations
and purchases that the Company processes. The Company recognizes revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists (upon contract signing or receipt of an authorized purchase order from the
customer); (2) delivery has occurred (upon performance of services in accordance with contract specifications); (3) customer payment is deemed fixed or determinable and free of contingencies or significant uncertainties (credit terms extending
beyond twelve months or significantly longer than is customary are deemed not to be fixed and determinable); and (4) collection is reasonably assured (there are no indicators of non-payment based upon history with the customer and/or upon completion
of credit procedures, if completed). As of September 30, 2004 and for each period presented, the Company did not have any arrangements with credit terms extending beyond twelve months. Billings made or payments received in advance of providing
services are deferred until the period these services are provided.



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The Companys wealth profiling business provides a prospect screening tool designed for the fundraising community to
find, profile, monitor, and dynamically rank the wealth in a nonprofit organizations prospect database., The Company recognizes revenues from its wealth profiling business from primarily three sources: (1) software licensing; (2) post consumer
support services of the software licenses; and (3) consulting services and related data processing fees. Revenue is recognized in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 97-2, Software Revenue Recognition. Software license fee revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred at the customers location, the fee is fixed or
determinable and collection is probable. The Company uses the residual method to recognize revenue when an arrangement includes one or more elements to be delivered at a future date and vendor-specific objective evidence (VSOE) of the
fair value of all undelivered elements exists. VSOE of fair value is based on the normal pricing practices for those products and services when sold separately by the Company and customer renewal rates for post-contract customer support services.
Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of the fair value of one or more undelivered elements does not exist, the
revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established.



The Companys awareness campaign business specializes in melding offline and online strategies and tools to build membership, affinity and impact for nonprofit
organizations, political campaigns and unions. The Company recognizes revenue from its awareness campaign business from primarily five sources: (1) software licensing; (2) website development and customization; (3) hosting services; (4) messaging
services (email/fax); and (5) consulting services. Revenue is recognized in accordance with AICPA SOP 97-2, Software Revenue Recognition. Software license fee revenue is recognized when persuasive evidence of an arrangement exists, delivery
of the product has occurred, fees from the arrangement are fixed or determinable, and collection is probable. The Company uses the residual method to recognize revenue when an arrangement includes one or more elements to be delivered at a future
date and VSOE of the fair value of all undelivered elements exists. VSOE of fair value is based on the normal pricing practices for those products and services when sold separately by the Company and customer renewal rates for post-contract customer
support services. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of the fair value of one or more undelivered elements does not
exist, the revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established.



For arrangements with multiple elements, the Company allocates revenues to each element of the transaction based upon its fair value. Fair value for all elements of an
arrangement is determined when the delivered items have value to the customer on a stand-alone basis, evidence of the fair value of the undelivered items exists based on the price of regular sales on a stand-alone basis, and delivery or performance
of the undelivered items is considered probable and substantially in the control of the Company. Items are considered to have stand alone value if the Company has sold that item separately on a regular basis in the past. When the fair value of a
delivered element has not been established or the Company is unable to establish stand-alone value, as is the case for the upfront payments for activation, maintenance, and use of Kintera Sphere, the revenues for the elements are recognized on a
straight-line basis over the entire term of the contract.



To date, the
Companys arrangements that contain multiple elements have been contracts that include upfront payments for activation, monthly fees for the maintenance and use of the Companys software and transaction fees tied to the donations and
purchases that the Company processes. Revenue associated with the upfront payments is deferred and recognized on a straight-line basis over the entire term of the contract which in general range from twelve to thirty-six months. Revenue related to
monthly maintenance and transaction fees for donations made through the website are recognized as services are provided. Credit card fees directly associated with processing customer donations and billed to customers are excluded from revenues in
accordance with Emerging Issues Task Force (EITF) consensus on Issue 99-19. Reporting Revenue Gross as a Principal verses Net as an Agent.



Software licenses are sold together with consulting services in both Kinteras wealth profiling and awareness campaign businesses. When this occurs, license fees are
recognized upon delivery provided that the revenue recognition criteria discussed above are met. Payment of the license fees is not dependent upon the performance of the services, and the services do not provide significant customization or
modification of the software products and are not essential to the functionality of the software that was delivered. For arrangements with services that are essential to the functionality of the software, the license and related service revenues are
recognized upon completion of the delivery of the license and the services with the residual method utilized for the remaining elements in the contract.



If at the outset of an arrangement the Company determines that the arrangement fee is not fixed or determinable, revenue is



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deferred until the arrangement fee becomes due. If at the outset of an arrangement the Company determines that
collectibility is not probable, revenue is deferred until the earlier of when collectibility becomes probable or the receipt of payment. Revenues from post-contract customer support services, such as software maintenance, are recognized on a
straight-line basis over the term of the support period. The majority of software maintenance agreements provide technical support as well as unspecified software product upgrades and releases when and if made available during the term of the
support period.



Software Development Costs



The Company accounts for Internal Use Software Development costs in accordance with SOP
98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. In accordance with SOP 98-1, costs to develop internal use computer software during the application development stage are capitalized. Internal use
capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the related software applications of up to three years and are included in depreciation and amortization. For the three and nine months ended
September 30, 2004 and September 30, 2003 the Company capitalized $99, $285, $0, and $0 related to internal use Software Development Costs, respectively.



The Company accounts for the development cost of software that is marketed to customers in accordance with Statement of Financial Accounting Standards No. 86,
Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed (SFAS 86). SFAS 86 requires product development costs to be charged to expense as incurred until technological feasibility is attained.
Technological feasibility is attained when software has completed a detail program design for its intended use. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the related software applications of
up to three years and are included in depreciation and amortization. The Company periodically reviews the software that has been capitalized for impairment. For the three and nine months ended September 30, 2004 and September 30, 2003 the Company
capitalized $734, $1,052, $0, and $0 related to Costs of Computer Software to be Sold, Leased or otherwise Marketed, respectively.



Stock-Based Compensation



As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options. Under APB 25, when the exercise price of the Companys employee stock options is equal to or greater than the fair
value of the underlying stock on the date of grant, no compensation expense is recognized. Certain of the Companys stock options have been granted with exercise prices below the fair value of the Companys common stock. For these stock
options, the Company has recorded deferred stock-based compensation for the difference between their exercise prices and such fair values which is being amortized to expense on a straight-line method over the stock options vesting period.



Compensation for equity instruments issued to non-employees has been
determined in accordance with SFAS No. 123, Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, and the EITF consensus on Issue 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services, as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more
reliably measured.



Pro forma information regarding net loss is required by
SFAS No. 123 and SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure, and has been determined as if the Company had accounted for its employee stock options under the fair value method.



Future pro forma results of operations under SFAS No. 123 may be materially different from
actual amounts reported. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the vesting period. The Company has used the minimum value method to determine the fair value of options granted
prior to its initial public offering. This method does not consider the expected volatility of the underlying stock, and is only available to non-public entities. Accordingly, the Company has used an estimated volatility factor of 80% through
December 31, 2003. The expected dividend yield is 0%.





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##### Table of Contents

The following table illustrates the effect on net losses if the Company had applied the fair value recognition provisions
of SFAS No. 123 to stock-based compensation:



|                                                                                                            |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                                                            |  | Three months ended September 30, |        |   | Nine months ended September 30, |  
|                                                                                                            |  | 2004                             |        |   | 2003                            |   |        | 2004 |  |   | 2003    |  
|                                                                                                            |  | (unaudited)                      |        |   | (unaudited)                     |  
|Net lossas reported                                                                                        |  | $                                | (4,463 | ) |                                 | $ | (2,355 | )    |  | $ | (13,373 | ) |  | $ | (7,009 | )
|Add: Stock-based employee compensation expense included in reported net loss                                |  |                                  | 1,393  |   |                                 |   | 979    |      |  |   | 3,706   |   |  |   | 1,860  |  
|Less: Total stock-based employee compensation expense determined under the fair value method for all awards |  |                                  | (1,500 | ) |                                 |   | (732   | )    |  |   | (4,340  | ) |  |   | (2,166 | )
|Pro forma net loss                                                                                          |  | $                                | (4,570 | ) |                                 | $ | (2,108 | )    |  | $ | (14,007 | ) |  | $ | (7,315 | )
|                                                                                                            |  |                                  |        |  
|Net loss per share:                                                                                         |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |        |  
|Basic and dilutedas reported                                                                               |  | $                                | (0.17  | ) |                                 | $ | (0.23  | )    |  | $ | (0.55   | ) |  | $ | (0.75  | )
|                                                                                                            |  |                                  |        |  
|Basic and dilutedpro forma                                                                                 |  | $                                | (0.17  | ) |                                 | $ | (0.21  | )    |  | $ | (0.58   | ) |  | $ | (0.78  | )



Comprehensive Income (Loss)



Comprehensive loss is the total of net loss and all other non-owner
changes in stockholders equity. The Companys other comprehensive income (loss) consists of unrealized gains or losses on available-for-sale investments. The components of comprehensive income (loss) are as follows:



|                                                |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |        |  
|----------------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                |  | Three months ended September 30, |        |   | Nine months ended September 30, |  
|                                                |  | 2004                             |        |   | 2003                            |   |        | 2004 |  |   | 2003    |  
|                                                |  | (unaudited)                      |        |   | (unaudited)                     |  
|Net loss                                        |  | $                                | (4,463 | ) |                                 | $ | (2,355 | )    |  | $ | (13,373 | ) |  | $ | (7,009 | )
|Other comprehensive income (loss)               |  |                                  |        |   |                                 |   |        |      |  |   |         |   |  |   |        |  
|Change in unrealized gain (loss) on investments |  |                                  | (25    | ) |                                 |   |       |      |  |   | 183     |   |  |   |       |  
|Total comprehensive loss                        |  | $                                | (4,488 | ) |                                 | $ | (2,355 | )    |  | $ | (13,190 | ) |  | $ | (7,009 | )



Net Loss Per Share



In accordance with SFAS No. 128, Earnings Per Share, basic net
loss per common share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Potentially dilutive securities are not considered in the calculation of net loss per common
share as their inclusions would be anti-dilutive.



In accordance with SAB No.
98, common shares issued for nominal consideration, if any, would be included in the per share calculations as if they were outstanding for all periods presented. No common shares have been issued for nominal consideration.



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##### Table of Contents

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share is as
follows:



|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                    |  | Three months ended September 30, |            |   | Nine months ended September 30, |  
|                                                    |  | 2004                             |            |   | 2003                            |   |            | 2004 |  |   | 2003       |  
|                                                    |  | (unaudited)                      |            |   | (unaudited)                     |  
|Numerator                                           |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Net loss                                            |  | $                                | (4,463     | ) |                                 | $ | (2,355     | )    |  | $ | (13,373    | ) |  | $ | (7,009     | )
|Denominator                                         |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted:                                  |  |                                  |            |   |                                 |   |            |      |  |   |            |   |  |   |            |  
|Weighted average common shares outstanding          |  |                                  | 27,532,865 |   |                                 |   | 12,833,501 |      |  |   | 25,437,599 |   |  |   | 12,802,160 |  
|Less: Weighted average shares subject to repurchase |  |                                  | (1,231,811 | ) |                                 |   | (2,649,557 | )    |  |   | (1,219,834 | ) |  |   | (3,439,218 | )
|                                                    |  |                                  |            |  
|Denominator on basic calculation                    |  |                                  | 26,301,054 |   |                                 |   | 10,183,944 |      |  |   | 24,217,765 |   |  |   | 9,362,942  |  
|                                                    |  |                                  |            |  
|Basic and diluted net loss per share                |  | $                                | (0.17      | ) |                                 | $ | (0.23      | )    |  | $ | (0.55      | ) |  | $ | (0.75      | )



The following table summarizes
potential common shares that are not included in the denominator used in the diluted net loss per share calculation because to do so would be antidilutive:



|                                   |  |               |  |          
|---------------------------------- |  | ------------- |  | ---------
|                                   |  | September 30,
|                                   |  | 2004          |  | 2003     
|                                   |  | (unaudited)  
|Common Stock Equivalents           |  |               |  |          
|Common stock subject to repurchase |  | 1,503,896     |  | 2,399,422
|Options to purchase common stock   |  | 4,871,368     |  | 2,782,965
|Warrants to purchase common stock  |  | 20,000        |  | 20,000   
|Convertible preferred stock        |  |              |  | 4,785,706
|                                   |  | 6,395,264     |  | 9,988,093



Segment Information



The Company adopted the provisions of SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS 131 requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies its operating segments based on how
management internally evaluates separate financial information, business activities and management responsibility. The Company believes it operates in a single business segment and adoption of this standard did not have a material impact on the
Companys financial statements.



Contingent Consideration



In connection with certain of the Companys acquisitions, if
certain future internal performance goals are achieved, the aggregate consideration for the respective acquisition can be increased. Such additional consideration, if earned, will be paid in the form of additional shares of the Companys common
stock, which were issued and held in escrow for that purpose. Any additional consideration paid will be allocated between goodwill, stock-based compensation expense and deferred compensation. The measurement, recognition and allocation of contingent
consideration are accounted for using the principles outlined below.



Measurement and Recognition



In accordance with SFAS
No. 141, Business Combinations (SFAS 141) which superceded APB No. 16, Business Combinations (APB 16) as of July 1, 2001, contingent consideration is recorded when a contingency is satisfied and additional
consideration is issued or becomes issuable. The Company records the additional consideration issued or issuable in connection with the relevant acquisition when a specified internal performance goal is met or becomes probable. For additional
consideration paid in stock, the Company calculates the amount of additional consideration using the closing price of its common stock on the date the performance goal is satisfied.



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##### Table of Contents

Amount Allocated to Goodwill



In accordance with EITF No. 95-8, Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a
Purchase Business Combination (EITF 95-8) and FIN 44, the portion of additional consideration issuable to holders of unrestricted common stock and fully vested options as of the acquisition date is recorded as additional purchase
price, as the consideration is unrelated to continuing employment with the Company. Such portion is allocated to goodwill.



Amount Allocated to Stock-Based Compensation Expense



In accordance with EITF 95-8, the intrinsic value associated with additional consideration related to stock or options that vest between the acquisition date and the date
at which the contingency is satisfied is recorded as an immediate charge to stock-based compensation expense because the consideration is related to continuing employment with the Company.



Recent Accounting Pronouncement



During March 2004, the FASB issued an exposure draft of a new standard entitled Share Based
Payment, which would amend SFAS No. 123, Accounting for Stock Based Compensation, and SFAS No. 95, Statement of Cash Flows. Among other items, the new standard would require the expensing, in the financial statements, of stock options
issued by the Company. The new standard, as proposed, would be effective for periods beginning after June 15, 2005 Throughout most of 2004, the FASB has continued to deliberate on different aspects of a new standard, and currently expects to issue a
final standard in the fourth quarter 2004. Although the Company has not yet completed an analysis to quantify the exact impact the new standard will have on its future financial performance, the disclosures in Note 1 provide detail as to the
Companys financial performance as if the Company had applied the fair value based method and recognition provisions of SFAS No. 123 to stock-based employee compensation to the current reporting periods.



2. Acquisitions



Prospect Information Network, LLC



In February 2004, the Company completed the acquisition of PIN, a provider of software, services and data for data screening services for nonprofit organizations.
PINs services enable fundraisers to more efficiently identify, profile, monitor and rank the wealth of prospects in their database. As consideration for all of the membership interests of PIN, the Company issued approximately 219,000 shares of
restricted common stock. Up to 336,000 additional shares of common stock are being held in escrow and will be released to the members of PIN if the revenue generated from PINs business during the year following the closing of the transaction
meets certain targets. In addition, some of the shares issued to the PIN members are being held in escrow to secure the obligations of PIN and its members under the purchase agreement.



Carol/Trevelyan Strategy Group



In March 2004, the Company completed the acquisition of CTSG, a provider of online advocacy solutions. CTSGs services enable customers to meld offline and online
strategies and tools to build membership, affinity and impact for nonprofit organizations, political campaigns and unions. The Company issued approximately 331,000 shares of restricted common stock and $250 in cash to acquire CTSG. Up to 93,000
additional shares of common stock are being held in escrow and will be released if the revenue generated from CTSGs business during the year following the closing of the transaction meets certain targets. In addition, some of the shares issued
are being held in escrow to secure the obligations of CTSG and its stockholders.



BNW, Inc.



In June 2004, the Company completed the
acquisition of BNW, Inc. (BNW), a provider of recreational/athletic facilities management software. BNWs services were designed specifically for colleges, universities and community centers like the YMCA. The Company issued
approximately 22,000 shares of restricted common stock and $281 in cash to acquire BNW. Up to 105,000 additional shares of common stock are being held in escrow and will be released if the revenue generated from BNWs business during the year
following the closing of the transaction meets certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of BNW and its stockholders.



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##### Table of Contents

Kindmark, Inc.



In August 2004, the Company completed the acquisition of certain intellectual property and other assets of KindMark, Inc. (Kindmark), a developer of corporate
giving solutions to help corporations and nonprofits automate and support their workplace giving programs. The Company issued approximately 58,000 shares of restricted common stock and paid $147 in cash. Up to approximately 130,000 additional shares
of common stock are being held in escrow and may be released to the stockholder of KindMark if the revenue generated from KindMarks business during the year following the closing of the transaction meets certain targets. In addition, some of
the shares issued are being held in escrow to secure the obligations of KindMark and its stockholder.



Kamtech, Inc.



In August 2004,
the Company completed the acquisition of Kamtech, Inc. (Kamtech), a provider of wealth screening services. The Company issued approximately 103,000 shares of restricted common stock and paid $310 in cash. Up to approximately 272,000
additional shares of common stock are being held in escrow and may be released if the revenue generated from the Companys wealth profiling business during the year following the closing of the transaction meets certain targets. In addition,
some of the shares issued are being held in escrow to secure the obligations of Kamtech.



Giving Capital, Inc.



In September 2004, the Company completed the acquisition of certain intellectual property and other assets of Giving Capital, Inc. (Giving Capital), which offers on-demand solutions for donor-advised funds and wealth management
products to financial institutions. The Company issued approximately 20,000 shares of restricted common stock and paid $7 in cash. Up to approximately 162,000 additional shares of common stock are being held in escrow and may be released if the
revenue generated from Giving Capitals business during the year following the closing of the transaction meets certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of Giving Capital.



The aggregate purchase price for PIN of $3,275 plus acquisition costs of $296;
the aggregate purchase price for CTSG of $5,274, plus acquisition costs of $315; the aggregate purchase price for BNW of $520, plus estimated acquisition costs of $100; the aggregate purchase price for Kindmark of $524, plus estimated acquisition
costs of $100; the aggregate purchase price for Kamtech of $926, plus estimated acquisition costs of $109; the aggregate purchase price for GCI of $159, plus estimated acquisition costs of $100; were preliminarily allocated as follows:



|                            |  |             |        |   |      |   |       |         |  |   |       |   |  |   |       |  
|--------------------------- |  | ----------- | ------ | - | ---- | - | ----- | ------- |  | - | ----- | - |  | - | ----- | -
|                            |  | PIN         |        |   | CTSG |   |       | KamTech |  |   | Other |  
|                            |  | (unaudited) |       
|Current assets              |  | $           | 1,052  |   |      | $ | 1,475 |         |  | $ | 555   |   |  | $ | 390   |  
|Fixed assets                |  |             | 51     |   |      |   | 186   |         |  |   |      |   |  |   | 150   |  
|Intangible assets           |  |             | 2,372  |   |      |   | 327   |         |  |   | 938   |   |  |   | 894   |  
|Goodwill                    |  |             | 1,480  |   |      |   | 479   |         |  |   | 100   |   |  |   | 300   |  
|Other assets                |  |             | 74     |   |      |   | 45    |         |  |   |      |   |  |   |      |  
|Total assets acquired       |  |             | 5,029  |   |      |   | 2,512 |         |  |   | 1,593 |   |  |   | 1,734 |  
|Current liabilities assumed |  |             | (2,658 | ) |      |   | (691  | )       |  |   | (567  | ) |  |   | (395  | )
|Deferred compensation       |  |             | 1,200  |   |      |   | 3,768 |         |  |   |      |   |  |   | 164   |  
|Net assets acquired         |  | $           | 3,571  |   |      | $ | 5,589 |         |  | $ | 1,026 |   |  | $ | 1,503 |  



The acquired intangible assets
represent the customer bases of PIN, CTSG, BNW, Kindmark, Kamtech and GCI and were assigned an estimated useful life of five years for amortization purposes. The Company is performing purchase price allocation studies. Any differences between the
initial purchase price allocation and the final purchase price allocation will primarily be related to the distribution between intangible assets and goodwill of the excess purchase price over net tangible assets acquired.



Unaudited Pro Forma Information



The following unaudited pro forma information for the nine months ended September 30, 2004
and the year ended December 31, 2003 assumes the PIN, CTSG, BNW, Kindmark, Kamtech and GCI acquisitions were consummated on January 1, 2003.





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|                                     |  |                                     |         |   |                              |   |         |  
|------------------------------------ |  | ----------------------------------- | ------- | - | ---------------------------- | - | ------- | -
|                                     |  | Nine months endedSeptember 30, 2004 |         |   | Year ended December 31, 2003 |  
|                                     |  | (unaudited)                         |        
|Net revenues                         |  | $                                   | 20,005  |   |                              | $ | 22,978  |  
|Net loss                             |  | $                                   | (15,686 | ) |                              | $ | (14,753 | )
|Net loss per sharebasic and diluted |  | $                                   | (0.68   | ) |                              | $ | (1.42   | )



These results give effect to the pro
forma adjustments for the amortization of acquired intangible assets and the amortization of deferred compensation. In addition, the common stock used as consideration for the acquisitions is presented as being outstanding during the entire period.



3. Legal Proceedings



From time to time, the Company may become involved in various lawsuits and legal proceedings
which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. The Company is not currently aware of any
such legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse affect on the Companys business, financial condition or operating results.



4. Stockholders Equity



In July 2004, the Company sold 2,500,000 shares of its common stock in a private placement
at a price of $8.00 per share for net proceeds of approximately $18.8 million.



5. Recent Events



In November 2004, the Company signed a
definitive agreement with Intuit Inc. to acquire all of the issued and outstanding capital stock of Intuits wholly-owned subsidiary, American Fundware Holding Company, Inc., in exchange for approximately $11.0 million in cash. American
Fundware Holding Company, Inc.s wholly-owned subsidiary, American Fundware, Inc., is a provider of Fundware  accounting software for nonprofit organizations and governments. The closing of this transaction is subject to customary closing conditions, including
the delivery of certain third party consents. The transaction is expected to close in November 2004.



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##### Table of Contents

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



This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as may, will, should, expect, plan, anticipate, believe, estimate, predict,
potential or continue, the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.



Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We are under no
obligation to update any of the forward-looking statements after the filing of this Quarterly Report on Form 10-Q/A to conform such statements to actual results or to changes in our expectations.



The following discussion should be read in conjunction with our consolidated financial
statements and the related notes and other financial information appearing elsewhere in this Form 10-Q/A. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the
factors which affect our business, including without limitation the disclosures made under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations, under the caption Risk
Factors, and the audited consolidated financial statements and related notes included in our Annual Report filed on Form 10-K for the year ended December 31, 2003 and other reports and filings made with the Securities and Exchange Commission.



Overview



We are an innovative provider of software that enables nonprofit organizations to use the
Internet to increase donations, reduce fundraising costs and build awareness and affinity for an organizations cause by bringing their employees, volunteers and donors together in online, interactive communities. Our flagship product, Kintera
Sphere, is managed as a single system and offered as a service accessed with a web browser. We were incorporated in the State of Delaware in February 2000 and launched our service in the first quarter of 2001. Nonprofit organizations pay Kintera
service fees for access to Kintera Sphere and transaction-based fees tied to the donations and purchases.



Since inception, we have significantly increased our revenues through a combination of factors, including obtaining new customers, expanding existing customer relationships, acquiring complementary businesses,
expanding the features of Kintera Sphere and increasing the number and amount of donations we process that result in transaction-based fees. Although our revenues have increased substantially in recent periods, we have experienced significant net
losses and negative cash flows from operations in each fiscal period since inception, and as of September 30, 2004, we had an accumulated deficit of $47.2 million.



We have derived the substantial majority of our historical revenues from fees paid by nonprofit organizations related to their use of
Kintera Sphere. The fees we receive for Kintera Sphere include upfront and monthly service fees that nonprofit organizations pay for access to Kintera Sphere as well as transaction-based fees tied to donations and purchases we process. We also
derive advertising and subscription revenue from the placement of advertisements in and the sale of subscriptions to our Masterplanner print and online calendar publications in New York, Los Angeles, San Diego, Boston and Philadelphia. We anticipate
that revenues related to Masterplanner will account for a substantially smaller portion of our revenues in future periods.



We derive a significant amount of our revenues from upfront service fees for Kintera Sphere, which are deferred and recognized as revenue over the entire term of our
contracts. Conversely, we recognize the operating expenses associated with generation of revenues from upfront service fees as they are incurred. Our operating expenses continue to increase as we expand our selling and marketing efforts and
administrative infrastructure to support increased sales that we will recognize as revenue in subsequent periods. We anticipate that our operating expenses will continue to grow in the near term. As a result, because of the deferral of recognition
of a portion of our revenues, our revenues and operating results will not increase at the same rate as our operating expenses incurred to support revenue recognized in future periods.



As of September 30, 2004, we have more than 1,900 signed contracts in the nonprofit sector, some of which have hundreds of individual
chapters or divisions. Our customers include health organizations, educational institutions, religious institutions, professional associations, political organizations, civic organizations and other charities, at both a local and national level. We
expect that a small group of nonprofit organizations in each fiscal period generally may account for a large portion of our revenues. The significance of a particular customer or group of customers in a given period will depend on the nature and
size of their fundraising events in that period as well as the scope of their use of Kintera Sphere. To continue our revenue growth, we must both obtain new customers and expand our existing customer relationships through usage of Kintera Sphere for
new campaigns.



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##### Table of Contents

In February 2004, we completed the acquisition of Prospect Information Network, LLC (PIN), a provider of software,
services and data for data screening services for nonprofit organizations. PINs services enable fundraisers to more efficiently identify, profile, monitor and rank the wealth of prospects in their database. As consideration for all of the
membership interests of PIN, we issued approximately 219,000 shares of common stock. Up to 336,000 additional shares of common stock are being held in escrow to the members of PIN if the revenue generated from PINs business during the year
following the closing of the transaction meets certain targets. In addition, some of the shares issued to the PIN members are being held in escrow to secure the obligations of PIN and its members under the purchase agreement.



In March 2004, we completed the acquisition of Carol/Trevelyan Strategy Group (CTSG), a
provider of online advocacy solutions. CTSGs services enable customers to meld offline and online strategies and tools to build membership, affinity and impact for nonprofit organizations, political campaigns and unions. We issued
approximately 331,000 shares of common stock and paid $250,000 to acquire CTSG. Up to 93,000 additional shares of common stock are being held in escrow if the revenue generated from CTSGs business during the year following the closing of the
transaction meets certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of CTSG and its stockholders.



In June 2004, we completed the acquisition of BNW, Inc. (BNW), a provider of recreational/athletic facilities management software. BNWs services were
designed specifically for colleges, universities and community centers like the YMCA. We issued approximately 22,000 shares of restricted common stock and $281,000 in cash to acquire BNW. Up to 105,000 additional shares of common stock are being
held in escrow if the revenue generated from BNWs business during the year following the closing of the transaction meets certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of BNW and its
stockholders.



In August 2004, we completed the acquisition of certain
intellectual property and other assets of KindMark, Inc. (Kindmark), a developer of corporate giving solutions to help corporations and nonprofits automate and support their workplace giving programs. We issued approximately 58,000
shares of restricted common stock and paid $147,000 in cash. Up to approximately 130,000 additional shares of common stock are being held in escrow and may be released to the stockholder of KindMark if the revenue generated from KindMarks
business during the year following the closing of the transaction meets certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of KindMark and its stockholder.



In August 2004, we completed the acquisition of Kamtech, Inc. (Kamtech), a
provider of wealth screening services. We issued approximately 103,000 shares of restricted common stock and paid $310,000 in cash. Up to approximately 272,000 additional shares of common stock are being held in escrow and may be released if the
revenue generated from our wealth profiling business during the year following the closing of the transaction meets certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of Kamtech.



In September 2004, we completed the acquisition of certain intellectual property and other
assets of Giving Capital, Inc. (Giving Capital), which offers on-demand solutions for donor-advised funds and wealth management products to financial institutions. We issued approximately 20,000 shares of restricted common stock and paid
$7,000 in cash. Up to approximately 162,000 additional shares of common stock are being held in escrow and may be released if the revenue generated from Giving Capitals business during the year following the closing of the transaction meets
certain targets. In addition, some of the shares issued are being held in escrow to secure the obligations of GivingCapital.



In November 2004, we signed a definitive agreement with Intuit Inc. to acquire all of the issued and outstanding capital stock of Intuits wholly-owned subsidiary,
American Fundware Holding Company, Inc., in exchange for approximately $11.0 million in cash. American Fundware Holding Company, Inc.s wholly-owned subsidiary, American Fundware, Inc., is a provider of Fundware TM accounting software for
nonprofit organizations and governments. The closing of this transaction is subject to customary closing conditions, including the delivery of certain third party consents. The transaction is expected to close in November 2004.



Cost of Revenues and Operating Expenses



Cost of revenues consists primarily of salaries, benefits and related expenses of operations
and database support personnel, depreciation allocations and communications charges associated with the delivery of our software as a service. Our operating expenses are classified into four categories: sales and marketing, product development and
support, general and administrative and stock-based compensation. We allocate the costs of overhead and facilities to each of the functional areas that use the overhead and facilities services based on their headcount. These allocated charges
include facilities rent for corporate offices, communication charges and depreciation expenses for office furniture and equipment.



Sales and marketing expenses consist primarily of salaries, commissions, benefits and related expenses of personnel engaged in selling, marketing and customer support
functions as well as public relations, advertising and promotional costs. As we expand our sales and marketing force, we expect sales and marketing expenses to increase due to new personnel expenses in future periods.



Product development and support expenses consist primarily of salaries and benefits and
related expenses for engineers, developers and quality assurance personnel as well as facilities and depreciation allocation. We expect to continue to devote substantial resources to product development and support such that these expenses will
increase in absolute dollars.



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General and administrative expenses consist primarily of salaries, benefits and related expenses for our executive,
accounting, and administrative personnel, third party professional service fees and allocated facilities and depreciation expenses. We expect general and administrative expenses to increase in the future, reflecting growth in our operations,
increased expenses associated with being a public company and other factors.



We had approximately 340 employees as of September 30, 2004 and intend to hire a significant number of employees in the future. This expansion will likely place significant demands on our management and operational resources. To manage
rapid growth and increased customer demand for our service, we must continue to invest in and implement additional operational systems, procedures and controls.



Application of Critical Accounting Policies



Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to the allowance for doubtful accounts, intangible assets, income taxes, commitments and accrued liabilities. We base our
estimates on historical experience and on various other assumptions that are believed 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 from these estimates under different assumptions or conditions.



We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective
judgment:



| |  | revenue recognition;
|- |  | --------------------



| |  | accounting for goodwill and other intangible assets;
|- |  | ----------------------------------------------------



| |  | accounting for software development costs;
|- |  | ------------------------------------------



| |  | accounting for stock-based compensation; and
|- |  | --------------------------------------------



| |  | accounting for income taxes.
|- |  | ----------------------------



You should refer to our Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 30, 2004 for a discussion of our policies on revenue recognition, accounting for goodwill and other intangible
assets, accounting for stock-based compensation and accounting for income taxes. See note 1 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for an updated discussion of our revenue recognition and
software development cost policies.



Results of Operations



Comparison of Results for the Three Months Ended September 30, 2004 to the Three
Months Ended September 30, 2003 and for the Nine months ended September 30, 2004 to the Nine months ended September 30, 2003



Revenues. Revenue increased from $2.2 million for the three months ended September 30, 2003 to $7.0 million for the three months ended September 30, 2004. Revenue
increased from $5.2 million for the nine months ended September 30, 2003 to $16.0 million for the nine months ended September 30, 2004. The revenues for each of these periods were as follows:





|                                     |  |                                          |           |                                         |   |           |  |      |            |  |   |          
|------------------------------------ |  | ---------------------------------------- | --------- | --------------------------------------- | - | --------- |  | ---- | ---------- |  | - | ---------
|                                     |  | For the three months ended September 30, |           | For the nine months ended September 30,
|                                     |  | 2004                                     |           | 2003                                    |   | 2004      |  | 2003
|Transaction and data processing fees |  | $                                        | 3,082,000 |                                         | $ | 1,443,000 |  | $    | 7,080,000  |  | $ | 3,265,000
|Monthly service fees                 |  |                                          | 2,988,000 |                                         |   | 596,000   |  |      | 6,405,000  |  |   | 1,507,000
|Amortization of upfront fees         |  |                                          | 931,000   |                                         |   | 168,000   |  |      | 2,480,000  |  |   | 380,000  
|                                     |  |                                          |           |                                        
|Total                                |  | $                                        | 7,001,000 |                                         | $ | 2,207,000 |  | $    | 15,965,000 |  | $ | 5,152,000



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The increase in revenue from 2003 to 2004 was due to a number of factors, including an increase in transaction fees and
data purchases (approximately $1.6 million for the three months ended September 30, 2004 and approximately $3.8 million for the nine months ended September 30, 2004), monthly service fees (approximately $2.4 million for the three months ended
September 30, 2004 and approximately $4.9 million for the nine months ended September 30, 2004), and amortization of upfront fees (approximately $0.8 million for the three months ended September 30, 2004 and approximately $2.1 million for the nine
months ended September 30, 2004).



The increase in transaction and data
processing fees resulted from higher transaction processing volumes for both the three and nine months ended September 30, 2004 compared to the three and nine months ended September 30, 2003, as well as the inclusion of data processing fee revenue
in 2004 due to the acquisition of PIN in February 2004 and the acquisition of Kamtech in August 2004. The increase in monthly service fees and amortization of upfront fees for the three and nine months ended September 30, 2004 compared to the three
and nine months ended September 30, 2003 was due to the addition of new customers, the increase in the scope of services from existing customers and the acquisition of CTSG in March 2004.



Cost of Revenues. Cost of revenues increased from $0.4 million for the three months ended September 30, 2003 to $2.0 million for the
three months ended September 30, 2004. Cost of revenues increased from $1.0 million for the nine months ended September 30, 2003 to $3.8 million for the nine months ended September 30, 2004. These increases were due primarily to expenses incurred to
service customer and revenue growth.



Sales and Marketing. Sales and
marketing expenses increased from $1.9 million for the three months ended September 30, 2003 to $4.5 million for the three months ended September 30, 2004. Sales and marketing expenses increased from $5.6 million for the nine months ended September
30, 2003 to $11.3 million for the nine months ended September 30, 2004. The increase was due primarily to the expansion of our sales force and customer support staff, both internally and from acquisitions (approximately $1.2 million for the three
months ended September 30, 2004 and approximately $3.2 million for the nine months ended September 30, 2004), and increased travel, advertising, telephone and consulting expenses (approximately $2.5 million for the three months ended September 30,
2004 and approximately $1.4 million for the nine months ended September 30, 2004).



Product Development and Support. Product development and support expenses increased from $0.8 million for the three months ended September 30, 2003 to $1.7 million for the three months ended September 30, 2004. Product development
and support expenses increased from $2.4 million for the nine months ended September 30, 2003 to $5.3 million for the nine months ended September 30, 2004. These increases were primarily due to expenses related to increased headcount, both
internally and from acquisitions, to support the development, enhancement and integration of Kintera Sphere and the expenses are net of costs capitalized as internally developed software.



General and Administrative. General and administrative expenses increased from $0.4 million for the three months ended September 30,
2003 to $2.1 million for the three months ended September 30, 2004. General and administrative expenses increased from $1.3 million for the nine months ended September 30, 2003 to $5.5 million for the nine months ended September 30, 2004. These
increases were due primarily to increased staffing and costs from the Companys growth and costs related to being a public company, including the implementation of Section 404 of the Sarbanes Oxley Act.



Stock-based Compensation. Stock-based compensation increased from $1.0 million for the
three months ended September 30, 2003 to $1.4 million for the three months ended September 30, 2004. Stock-based compensation increased from $1.9 million for the nine months ended September 30, 2003 to $3.7 million for the nine months ended
September 30, 2004. These increases were due to the amortization of deferred compensation expense from stock issuances in acquisitions and additional stock option grants to new and existing employees prior to our initial public offering in 2003.



Liquidity and Capital Resources



We have historically funded our operations principally through private placements of equity
securities. In December 2003, we completed our initial public offering and received net proceeds of $36.1 million, including $4.9 million from the exercise of the underwriters over allotment option. In July 2004, we sold 2.5 million common
shares for net proceeds of approximately $18.5 million. As of September 30, 2004, we had cash, cash equivalents and short-term investments totaling approximately $46.8 million.



Net cash used in operating activities was $1.9 million and $7.3 million for the nine months ended September 30, 2003 and September 30, 2004,
respectively. In 2003, this was primarily the result of the net loss ($7.0 million), partially offset by changes in operating assets and liabilities (approximately $2.4 million) and non-cash expenses (approximately $2.7 million) consisting primarily
of amortization of deferred compensation and intangible assets and depreciation. In 2004, this was primarily the result of the net loss ($13.4 million) and changes in operating assets and liabilities (approximately $0.8 million), partially offset by
non-cash expenses (approximately $5.3 million) consisting primarily of amortization of deferred compensation, software development costs and



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intangible assets and depreciation.



Net cash provided by investing activities was $0.7 million for the nine months ended September 30, 2003. This was primarily the result of the sale of marketable
securities (approximately $2.1 million) partially offset by purchases of property and equipment (approximately $0.3 million) and acquisition and other costs (approximately $1.1 million).



Net cash used in investing activities was $38.5 million for the nine months ended September 30, 2004. This was primarily the result of the
purchase of marketable securities (approximately $39.5 million), purchases of property and equipment (approximately $1.2 million), development of internal software (approximately $1.2 million) and acquisition and other costs (approximately $1.7
million) offset by the sale of marketable securities (approximately $4.0 million) and use of other assets (approximately $0.6 million).



Net cash provided by financing activities was $5.7 million for the nine months ended September 30, 2003 was primarily from sale of preferred stock.



Net cash provided by financing activities was primarily provided by the private placement of
securities (approximately $18.5 million) and proceeds from the sale of common stock through our Employee Stock Purchase Plan and from exercise of stock options (approximately $0.9 million) and was primarily offset by the payment of the line of
credit (approximately $0.4 million).



We believe that our cash, cash
equivalents and short-term investments will be sufficient to meet our working capital requirements and contractual commitments for at least the next 12 months.



If we are unable to increase our revenues, we will need to raise additional funds to finance our future capital needs. We may need additional financing earlier than we
anticipate. If we raise additional funds through the sale of equity or convertible debt securities, these transactions may dilute the value of our outstanding common stock. We may also decide to issue securities, including debt securities, which
have rights, preferences and privileges senior to our common stock. We cannot assure you that we will be able to raise additional funds on terms favorable to us or at all. If future financing is not available or is not available on acceptable terms,
we may not be able to fund our future needs. This may prevent us from increasing our market share, capitalizing on new business opportunities or remaining competitive in our industry.



We currently do not have any variable interest entities. We do not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.



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RISK FACTORS



You should consider each of the following factors as well as the other information in this Quarterly Report in evaluating our business and
our prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the
following risks actually occur, our business and financial results could be harmed. In that case, the trading price of our common stock could decline. You should also refer to the other information set forth in this Quarterly Report, including our
unaudited financial statements and the related notes.



Because we have a
limited operating history, it is difficult to evaluate our prospects.



We incorporated in February 2000 and first achieved meaningful revenues in 2001. As a result, we will encounter risks and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets. These risks include
the following:



| |  | we may not increase our sales to our existing customers and expand our customer base;
|- |  | -------------------------------------------------------------------------------------



| |  | fees related to Kintera Sphere have been our principal source of revenues, and we may not successfully introduce new services and enhance existing services of Kintera Sphere;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we may not successfully expand our sales and marketing efforts;
|- |  | ---------------------------------------------------------------



| |  | we may not attract and retain key sales, technical and management personnel; and
|- |  | --------------------------------------------------------------------------------



| |  | we may not effectively manage our anticipated growth.
|- |  | -----------------------------------------------------



In addition, because of our limited operating history and the early stage of the market for online fundraising solutions, we have limited insight into trends that may
emerge and affect our business.



We have a history of losses, and we may
not achieve or maintain profitability.



We have experienced operating
and net losses in each fiscal quarter since our inception, and as of September 30, 2004, we had an accumulated deficit of $47.2 million. We incurred net losses of $4.5 million for the three months ended September 30, 2004 and $2.4 million for the
three months ended September 30, 2003. We incurred net losses of $13.4 million for the nine months ended September 30, 2004 and $7.0 million for the nine months ended September 30, 2003. We will need to increase revenues to achieve profitability,
and we may not be able to do so. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. We also may fail to accurately estimate our increased operating expenses as
we grow. If our operating expenses exceed our expectations, our financial performance will be adversely affected.



Recent acquisitions and future acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and strain our resources, which could
prevent us from properly servicing and maintaining customer relationships.



Acquisitions have been an important part of our development to date. During the first nine months of 2004, we completed six acquisitions of complementary businessesProspect Information Network, Carol/Trevelyan Strategy Group
(CTSG), BNW, Inc., Kindmark (assets), Kamtech, Inc., and Giving Capital, Inc. We are in the process of integrating their operations with ours and finalizing the purchase price allocation for Prospect Information Network and CTSG, and
BNW, Inc., Kindmark, Inc., Kamtech, Inc. and Giving Capital, Inc. We cannot assure you that we will succeed in completing these integration efforts on a timely basis, or at all. As part of our business strategy, we may continue to seek to acquire
companies, services and technologies that we feel could complement or expand our business, augment our market coverage, enhance our technical capabilities, provide us with important customer contacts or otherwise offer growth opportunities.
Acquisitions and investments involve numerous risks, including:



| |  | difficulties in integrating operations, technologies, services, accounting and personnel;
|- |  | -----------------------------------------------------------------------------------------



| |  | difficulties in supporting and transitioning customers of our acquired companies;
|- |  | ---------------------------------------------------------------------------------



| |  | diversion of financial and management resources from existing operations;
|- |  | -------------------------------------------------------------------------



| |  | risks of entering new sectors of the nonprofit industry;
|- |  | --------------------------------------------------------





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| |  | potential loss of key employees; and
|- |  | ------------------------------------



| |  | inability to generate sufficient revenues to offset acquisition or investment costs.
|- |  | ------------------------------------------------------------------------------------



Acquisitions also frequently result in recording of goodwill and other intangible assets which are subject to potential impairments in the
future that could harm our operating results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted which could affect the market price of our stock. As a result, if we
fail to properly evaluate and execute acquisitions or investments, we may not achieve the anticipated benefits of any such acquisition, and we may incur costs in excess of what we anticipate.



Nonprofit organizations have not traditionally used the Internet or online software
solutions, and they may not adopt our solution.



The market for online
fundraising solutions for nonprofit organizations is new and emerging. Nonprofit organizations have not traditionally used the Internet or online software solutions for fundraising. We cannot be certain that the market will continue to develop and
grow or that nonprofit organizations will elect to adopt our solution rather than continuing to use traditional offline methods, attempting to develop software solutions internally or utilizing standardized software solutions without integrating
them. Nonprofit organizations that have already invested substantial resources in other fundraising methods may be reluctant to adopt a new approach like ours to supplement or replace their existing systems or methods. In addition, increasing
concerns about fraud, privacy, reliability and other problems may cause nonprofit organizations not to adopt the Internet as a method for fundraising. We expect that we will continue to need to pursue intensive marketing and sales efforts to educate
prospective nonprofit organization customers about the uses and benefits of our solution. If demand for and market acceptance of our solution does not occur, we may not grow our business as we expect.



If our efforts to increase awareness of Kintera Sphere and expand sales to other
sectors of the nonprofit industry do not succeed, our revenue may not increase as we expect.



We have initially sold our Kintera Sphere solution to nonprofit organizations in the health and human services sectors, in part because they rely on special events for fundraising. Based on our experience, we believe
that many nonprofit organizations in all nonprofit sectors are still unaware of the benefits that can be achieved through the use of Kintera Sphere. We intend to commit significant resources to promote awareness of Kintera Sphere, but we cannot
assure you that we will be successful in this effort. Developing and maintaining awareness of Kintera Sphere is important to our success. If we fail to successfully promote Kintera Sphere, our financial condition could suffer.



We have also begun, and intend to continue, to market Kintera Sphere to nonprofit
organizations in additional nonprofit sectors. Organizations in these other sectors may not rely on special events or be as willing to purchase our solution as health and human services nonprofit organizations. If we are unable to increase awareness
of Kintera Sphere and expand sales to other sectors of the nonprofit industry, our revenue may not increase as we expect.



Sales cycles to major customers can be long, which makes it difficult to forecast our results.



It typically takes us between three and nine months to complete a sale to a major customer
account, but it can take us up to one year or longer. It is therefore difficult to predict the quarter in which a particular sale will occur and to forecast our sales. The period between our initial contact with a potential customer and its purchase
of Kintera Sphere is relatively long due to several factors, including:



| |  | our need to educate potential customers about the uses and benefits of Kintera Sphere;
|- |  | --------------------------------------------------------------------------------------



| |  | our customers have budget cycles which affect the timing of purchases; and
|- |  | --------------------------------------------------------------------------



| |  | many of our customers have lengthy internal approval processes before purchasing our services.
|- |  | ----------------------------------------------------------------------------------------------



Any delay or failure to complete sales in a particular quarter could reduce our revenues in that quarter, as well as subsequent quarters
over which revenues for the sale may be recognized. If our sales cycle unexpectedly lengthens in general or for one or more large orders, it would adversely affect the timing of our revenues.



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If we are not able to manage our growth effectively, we may not become profitable.



Since commencing operations in 2000, we have experienced significant growth, and we
anticipate that significant expansion will continue to be required to address potential market opportunities. We anticipate significantly expanding the size of our sales and marketing, product development and general and administrative staff and
operations, as well as our financial and accounting controls. There can be no assurance that our infrastructure will be sufficiently scalable to manage our projected growth. For example, our anticipated growth will result in a significant increase
in the volume of transactions handled by our payment processing system. If we are unable to sufficiently enhance and improve this system to handle this increased volume, our profitability and growth may suffer. There also can be no assurance that if
we continue to expand our operations, management will be effective in expanding our physical facilities or that our systems, procedures or controls will be adequate to support such expansion. Our inability to manage our growth may harm our business.



Any failure to manage and accurately account for large amounts of
donations we process could diminish the use of Kintera Sphere, which may prevent or delay our becoming profitable.



Our ability to manage and account accurately for the online donations we process requires a high level of internal controls. We have a limited operating history in
maintaining these internal controls. As our business continues to grow, we must monitor our internal controls to ensure they are effective. Our success requires significant customer and donor confidence in our ability to handle large and growing
donation volumes and amounts. Any failure to maintain necessary controls or to accurately manage online donations could severely diminish nonprofit organizations and donors use of Kintera Sphere.



We may experience customer dissatisfaction and lose sales if our solution does not
scale to accommodate a high volume of traffic and transactions.



We
seek to generate a high volume of traffic and transactions on the websites we host for our customers. A portion of our revenues depends on the number of donations raised by our customers using Kintera Sphere. Accordingly, the satisfactory
performance, reliability and availability of our solution, including its processing systems and network infrastructure, are critical to our reputation and our ability to attract and retain new customers. Any system interruptions that result in the
unavailability of our solution or reduced donor activity would reduce the volume of donations and may also diminish the attractiveness of our solution to our customers. Furthermore, our inability to add software and hardware or to develop and
further upgrade our existing technology, payment processing systems or network infrastructure to accommodate increased traffic or increased transaction volume may cause unanticipated system disruptions, slower response times, degradation in levels
of customer service, impaired quality of the users experience, and delays in reporting accurate financial information. There can be no assurance that we will be able to effectively upgrade and expand our systems or to integrate smoothly any
new technologies with our existing systems. Any inability to do so would have an adverse effect on our ability to maintain customer relationships and grow our business.



We may not be able to develop new enhancements to or support services for Kintera Sphere at a rate required to achieve customer
acceptance in our rapidly changing market.



Although Kintera Sphere is
designed to operate with a variety of network hardware and software platforms, we will need to continuously modify and enhance Kintera Sphere to keep pace with changes in Internet-related hardware, software, communication, browser and database
technologies. Our future success depends on our ability to develop new enhancements to or support services for Kintera Sphere that keep pace with rapid technological developments and that address the changing needs of our nonprofit customers. We may
not be successful in either developing such services or introducing them to the market in a timely manner. In addition, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or
technologies, could increase our development expenses. Any failure of our services to operate effectively with the existing and future network platforms and technologies could limit or reduce the market for our services, result in customer
dissatisfaction or cause our revenue growth to suffer.



If we are unable
to detect and prevent unauthorized use of credit cards and bank account numbers and safeguard confidential donor data, our reputation may be harmed and customers may be reluctant to use our service.



We rely on encryption and authentication technology to provide secure transmission of
confidential information, including customer credit card and bank account numbers, and protect confidential donor data. Identity thieves and criminals using stolen credit card or bank account numbers could still potentially circumvent our anti-fraud
systems. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the technology we use to protect sensitive transaction data. If any such compromise of
our security were to occur, it could result in misappropriation of our proprietary information or interruptions in our operations and have an adverse impact on our reputation. We may have to spend significant money and time protecting against such
security breaches or alleviating problems caused by such breaches. If we are



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unable to detect and prevent unauthorized use of credit cards and bank account numbers or protect confidential donor data, our business may suffer.



If we were found subject to or in violation of any laws or regulations
governing privacy or electronic fund transfers, we could be subject to liability or forced to change our business practices.



It is possible that the payment processing component of Kintera Sphere is subject to various governmental regulations. In addition, we may be subject to the privacy
provisions of the Gramm-Leach-Bliley Act and related regulations. Pending legislation at the state and federal levels may also restrict further our information gathering and disclosure practices. Existing and potential future privacy laws may limit
our ability to develop new products and services that make use of data gathered through our service. The provisions of these laws and related regulations are complicated, and we do not have extensive experience with these laws and related
regulations. Even technical violations of these laws can result in penalties that are assessed for each non-compliant transaction. Given the high volumes of transactions we process, if we were found to be subject to and in violation of any of these
laws or regulations, our business would suffer and we would likely have to change our business practices. In addition, these laws and regulations could impose significant costs on us and make it more difficult for donors to make online donations.



System failure could harm our reputation and reduce the use of Kintera
Sphere by nonprofit organizations, which could cause our revenues and operating results to decline.



If nonprofit organizations believe Kintera Sphere to be unreliable, they will be unlikely to use Kintera Sphere which will harm our revenue and profits. Our systems and operations are vulnerable to damage or
interruption from earthquakes, floods, fires, power loss, telecommunication failures, electronic virus or worm attacks and similar events. They also could be subject to break-ins, sabotage and intentional acts of vandalism. Our business interruption
insurance may not be sufficient to compensate us for losses that may occur. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities could result in interruptions in our services.
Interruptions in our service could harm our reputation and reduce our revenues and profits.



Our operating results have fluctuated and may fluctuate significantly, and these fluctuations may cause our stock price to fall.



Our operating results have varied significantly in the past and will likely vary in the future as the result of fluctuations in our revenues
and operating expenses. For example, our revenues increased from $5.2 million for the nine months ended September 30, 2003 to $16.0 million for the nine months ended September 30, 2004 and our net loss increased from $7.0 million for the nine months
ended September 30, 2003 to $13.4 million for the nine months ended September 30, 2004. We expect that our operating expenses may increase in the future as we expand our selling and marketing activities and hire additional personnel. Our revenues in
any period depend substantially on the number and size of donations that we process in that period for customer sponsored fundraising events. As a result, it is possible that in some future periods, our revenues may not meet our expectations or, due
to our increased expense levels, our results of operations may be below the expectations of current or potential investors. If this occurs, the price of our common stock may decline.



Because a limited number of our customers accounts for a substantial portion of our revenues, our revenues could decline if we lose a
major customer.



A significant portion of our revenue comes from a
limited number of customers. For example, 10 nonprofit organizations accounted for approximately 29% of our total revenues for the three months ended September 30, 2004. We expect that a limited number of customers will continue to account for a
substantial portion of our revenues in each fiscal period for the foreseeable future. As a result, if we lose a major customer, if a major contract is delayed or cancelled or if a major anticipated sale is not made, our revenues could decline. In
addition, customers that have accounted for significant revenue in the past may not continue to generate revenue in any future period, depending on the nature and size of their fundraising events in that period as well as the scope of their use of
Kintera Sphere.



We are dependent on our management team, and the loss of
any key member of this team may prevent us from achieving our business plan in a timely manner.



Our success depends largely upon the continued services of our executive officers and other key personnel. In particular, we rely on Harry E. Gruber, M.D., our President, Chief Executive Officer and Chairman. We do
not have employment agreements with our executive officers and, therefore, they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any of our employees. The loss of one or
more of our key employees could seriously harm our business, results of operations and financial condition. We cannot assure you that in such an event we would be able to recruit personnel to replace these individuals in a timely manner, or at all,
on acceptable terms.



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Because competition for highly qualified sales and software development personnel is intense, we may not be able to
attract and retain the employees we need to support our planned growth.



To execute our growth plan, we need to significantly increase the size of our sales force and software development staff. To successfully meet our objectives, we must attract and retain highly qualified sales and software development
personnel with specialized skill sets focused on the nonprofit industry. Competition for qualified sales and software development personnel can be intense, and we cannot assure you that we will be successful in attracting and retaining them. The
pool of qualified personnel with experience working with or selling to non-profit organizations is limited. Our ability to expand our sales team will depend on our ability to recruit, train and retain top quality people with advanced skills who
understand sales to nonprofit organizations. Because the sale of online fund raising solutions is still relatively new, there is a shortage of sales personnel with the experience we need. We have from time to time in the past experienced, and we
expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications for our business. In addition, it takes time for our new sales personnel to become productive, particularly
with respect to obtaining major customer accounts. In many cases, newly hired sales personnel are unable to develop their skills rapidly enough, which results in a relatively high turnover rate and a corresponding increased need to make continual
new hires. If we are unable to hire or retain qualified sales and software development personnel, or if newly hired personnel fail to develop the necessary skills or reach productivity slower than anticipated, it would be more difficult for us to
sell our solution, and we may experience a shortfall in revenues and not achieve our planned growth.



Our failure to compete successfully against current or future competitors could cause our revenues or market share to decline.



Our market is fragmented, competitive and rapidly evolving, and there are limited barriers to entry for some aspects of this market. We
mainly face competition from four sources:



| |  | traditional fundraising methods;
|- |  | --------------------------------



| |  | custom developed solutions created by technical staff or outside custom service providers;
|- |  | ------------------------------------------------------------------------------------------



| |  | companies that offer specialized software designed to address needs of businesses across a variety of industries; and
|- |  | ---------------------------------------------------------------------------------------------------------------------



| |  | companies that offer integrated software solutions designed to address the needs of nonprofit organizations.
|- |  | ------------------------------------------------------------------------------------------------------------



In the past, we have competed with these companies by focusing on and committing significant
resources to promote awareness of Kintera Sphere to nonprofit organizations in the health and human services sector, and by developing features to better meet the needs of our customers. However, the companies we compete with may have greater
financial, technical and marketing resources, generate greater revenues and better name recognition than we do. These competitive pressures could cause our revenues and market share to decline.



Because we recognize revenue from upfront payments ratably over the term of the
contract, downturns in sales may not be immediately reflected in our revenues.



We have derived the substantial majority of our historical revenues from fees paid by nonprofit organizations related to their use of Kintera Sphere. The fees we receive for Kintera Sphere include upfront fees that nonprofit organizations
pay for the right to access to Kintera Sphere. We recognize revenue from the upfront service fees over the term of the contract, which is typically one year or more. As a result, a portion of our revenues in each quarter is deferred revenue from
contracts entered into and paid for during previous quarters. Because of this deferred revenue, the revenues we report in any quarter or series of quarters may mask significant downturns in sales and the market acceptance of Kintera Sphere.



Any failure to protect our intellectual property rights could impair our
ability to protect our proprietary technology and establish our Kintera Sphere brand.



Our success and ability to compete depend in part on our internally developed technology and software applications. We rely on patent, trademark, copyright and trade secret laws and restrictions in the United States
and other jurisdictions, together with contractual restrictions on our employees, strategic partners and customers, to protect our proprietary rights. Any of our trademarks may be challenged by others or invalidated through administrative process or
litigation. We currently have one issued patent and 17 pending patent applications in the United States. We may not be successful in obtaining these patents and we may be unable to obtain additional patent protection in the future. In addition, any
issued patents may not provide us with any competitive advantages, or may



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be challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights
are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our solution is available. As a result, we cannot assure you that our means of protecting our proprietary rights
will be adequate. Furthermore, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. Any such infringement or misappropriation could have a material adverse effect on our
revenues and prospects for growth.



Our ability to generate increased
revenues depends in part on the efforts of our strategic partners, over whom we have little control.



Our ability to generate increased revenues depends in part upon the ability and willingness of our strategic partners to increase awareness of our solution to their customers. We cannot control the level of effort
these partners expend or the extent to which any of them will be successful in increasing awareness of our solution. We may not be able to prevent these parties from devoting greater resources to support services developed by them or other third
parties. If our strategic partners fail to increase awareness of our solution or to assist us in getting access to decision-makers, then we may need to increase our marketing expenses, change our marketing strategy or enter into marketing
relationships with different parties, any of which could impair our ability to generate increased revenues.



Our common stock price may fluctuate substantially, and your investment could suffer a decline in value.



The market price of our common stock may be volatile and could fluctuate substantially due to many factors, including:



| |  | actual or anticipated fluctuations in our results of operations;
|- |  | ----------------------------------------------------------------



| |  | announcements of technological innovations or technology standards by us or our competitors;
|- |  | --------------------------------------------------------------------------------------------



| |  | the introduction of new products or services, or product or service enhancements by us or our competitors;
|- |  | ----------------------------------------------------------------------------------------------------------



| |  | developments with respect to our or our competitors intellectual property rights;
|- |  | ----------------------------------------------------------------------------------



| |  | announcements of significant acquisitions or other agreements by us or our competitors;
|- |  | ---------------------------------------------------------------------------------------



| |  | our sale of common stock or other securities in the future;
|- |  | -----------------------------------------------------------



| |  | the trading volume of our common stock;
|- |  | ---------------------------------------



| |  | conditions and trends in the nonprofit industry;
|- |  | ------------------------------------------------



| |  | changes in our pricing policies or the pricing policies of our competitors;
|- |  | ---------------------------------------------------------------------------



| |  | changes in the estimation of the future size and growth of our markets; and
|- |  | ---------------------------------------------------------------------------



| |  | general economic and geopolitical conditions.
|- |  | ---------------------------------------------



In addition, the stock market in general, the Nasdaq National Market, and the market for shares of technology companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, the market prices of securities and technology companies have been particularly volatile. These broad market and
industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a companys securities, securities class action litigation
has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of managements attention and resources.



Because of their significant stock ownership, some of our existing stockholders will be able to exert control over us and our
significant corporate decisions.



Our executive officers, directors
and their affiliates own, in the aggregate, approximately 40.2% of our outstanding common stock. As a result, these persons, acting together, have the ability to determine the outcome of all matters submitted to our stockholders



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for approval, including the election and removal of directors and any significant transaction involving us. In addition, these persons, acting together, have
the ability to control the management and affairs of our company. This concentration of ownership may harm the market price of our common stock by, among other things:



| |  | delaying, deferring, or preventing a change in control of our company;
|- |  | ----------------------------------------------------------------------



| |  | impeding a merger, consolidation, takeover, or other business combination involving our company;
|- |  | ------------------------------------------------------------------------------------------------



| |  | causing us to enter into transactions or agreements that are not in the best interests of all stockholders; or
|- |  | --------------------------------------------------------------------------------------------------------------



| |  | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.
|- |  | ----------------------------------------------------------------------------------------------------------------------



Our future capital needs are uncertain, and we may need to raise additional funds in
the future which may not be available on acceptable terms or at all.



Our capital requirements will depend on many factors, including:



| |  | acceptance of, and demand for, Kintera Sphere;
|- |  | ----------------------------------------------



| |  | the costs of developing new products, services or technology;
|- |  | -------------------------------------------------------------



| |  | the extent to which we invest in new technology and product development;
|- |  | ------------------------------------------------------------------------



| |  | the number and timing of acquisitions and other strategic transactions; and
|- |  | ---------------------------------------------------------------------------



| |  | the costs associated with the growth of our business, if any.
|- |  | -------------------------------------------------------------



Our existing sources of cash and cash flows may not be sufficient to fund our activities. As a result, we may need to raise additional funds, and such funds may not be
available on favorable terms, or at all. Furthermore, if we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences,
and privileges senior to those or our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization. If we cannot raise funds on acceptable terms, we may not be able to
develop or enhance our products and services, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.



Our certificate of incorporation authorizes our board of directors to issue new series
of preferred stock that may have the effect of delaying or preventing a change of control, which could adversely affect the value of your shares.



Our certificate of incorporation, as amended, provides that our board of directors will be authorized to issue from time to time, without further stockholder approval, up
to 20,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates,
conversion rights, voting rights, rights of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series. Such shares of preferred
stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer or prevent a change of control of our company without further action by our
stockholders. Such shares of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights, and by the creation of
class or series voting rights.



Anti-takeover provisions under our
charter documents and Delaware law could delay or prevent a change of control and could also limit the market price of our stock.



Our certificate of incorporation, as amended, and our bylaws, as amended, contain provisions that could delay or prevent a change of control of our company or changes in
our board of directors that our stockholders might consider favorable. In addition, our certificate of incorporation, as amended, and our bylaws, as amended, provide that our board of directors will be classified into three classes of directors upon
consummation of this offering, with each class elected at a separate election. The existence of a staggered board could delay a potential acquiror from obtaining majority control of our board, and thus deter potential acquisitions that might



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otherwise provide our stockholders with a premium over the then current market price for their shares.



In addition, we are governed by the provisions of Section 203 of the Delaware General
Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation, as amended, and our bylaws, as amended, and
Delaware law could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including delaying or impeding a merger,
tender offer, or proxy contest or other change of control transaction involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could prevent the consummation of a transaction in which our
stockholders could receive a substantial premium over the then current market price for their shares.



Our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on our stock price.



Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning
with our Annual Report on Form 10-K for the fiscal year ending December 31, 2004, we will be required to furnish a report by our management on our internal control over financial reporting. Such report will contain, among other matters, an
assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include
disclosure of any material weaknesses in our internal control over financial reporting identified by management. Such report will also contain a statement that our auditors have issued an attestation report on managements assessment of such
internal controls.



The Committee of Sponsoring Organizations of the Treadway
Commission (COSO) provides a framework for companies to assess and improve their internal control systems. While we feel that our key controls are currently effective, we continue to enhance our internal over financial reporting by adding additional
resources in key functional areas and bringing all of our operations up to the level of documentation, segregation of duties, and systems security necessary, as well as transactional control procedures required, under the new standard issued by the
Public Company Accounting Oversight Board.



We have begun a detailed assessment
of our internal controls. This process is both challenging and costly. Currently, we are in the testing and remediation phase where we have identified potential control deficiencies in our system of internal controls and are in the process of
remediation. We will assess whether the potential control deficiencies rise to the level of significant deficiencies or material weaknesses. If any of the deficiencies rise to the level of material weaknesses in our internal control over financial
reporting, we will be unable to assert such internal control is effective. If we are unable to assert that our internal control over financial reporting is effective as of December 31, 2004 (or if our auditors are unable to attest that our
managements report is fairly stated or they are unable to express an opinion on our managements evaluation or on the effectiveness of the internal controls), we could lose investor confidence in the accuracy and completeness of our
financial reports, which in turn could have an adverse effect on our stock price.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



Due to the nature of our short-term investments, we have concluded that there is no material market risk exposure. Therefore, no quantitative tabular disclosure was required.



Item 4. Controls and Procedures



Under the
supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule
13a15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as
of the end of the period covered by this quarterly report.



There has been no
change in our internal controls over financial reporting during the quarterly period that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



From time to time, we
may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that
may harm our business. We are not currently aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.



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



The Securities and Exchange Commission declared our first registration statements, which we filed on Form S-1 (Registration No. 333-109169 and Registration Statement No. 333-111340) under the Securities Act of 1933 in
connection with the initial public offering of our common stock, effective on December 19, 2003. The sale of shares of our common stock resulted in aggregate gross proceeds of approximately $40.25 million, approximately $2.8 million of which we
applied to underwriting discounts and commissions and approximately $1.3 million of which we applied to related costs. As a result, we received approximately $36.1 million of the offering proceeds.



As of September 30, 2004, we had used approximately $1.2 million for purchases of property
and equipment, approximately $1.7 million for acquisitions of other businesses and approximately $7.3 million for working capital. Additionally, we have invested approximately $39.0 million of our proceeds in short-term marketable securities. The
proceeds used for working capital included regular compensation for officers and directors. The use of proceeds does not represent a material change from the use of proceeds described in the prospectus.



The following sales of unregistered securities occurred during the three months ended
September 30, 2004:



In July 2004, the Company sold 2,500,000 shares of its
common stock in a private placement at a price of $8.00 per share for net proceeds of approximately $18.8 million.



In August 2004, we issued approximately 58,000 shares of common stock in connection with the acquisition of certain assets of Kindmark, Inc. (Kindmark). The
shares of common stock were issued to investors pursuant to an Acquisition Agreement by and among us, Kindmark and the holders of a majority of Kindmark securities. The shares of common stock were issued pursuant to an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated under the Securities Act.



In August 2004, we issued approximately 140,000 shares of common stock in connection with the acquisition of Kamtech, Inc. (Kamtech). The shares of common
stock were issued to investors pursuant to an Acquisition Agreement by and among us, Kamtech and the holders of a majority of Kamtech securities. The shares of common stock were issued pursuant to an exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated under the Securities Act.



In September 2004, we issued approximately 20,000 shares of common stock in connection with the acquisition of Giving Capital, Inc. (Giving Capital). The shares of common stock were issued to investors
pursuant to an Acquisition Agreement by and among us, Giving Capital and the holders of a majority of Giving Capital securities. The shares of common stock were issued pursuant to an exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended, and/or Regulation D promulgated under the Securities Act.



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Item 6. Exhibits



(a). Exhibits



|              |  |                                                                                                                                                                                                                                 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                         
|2.1(1)       |  | Agreement and Plan of Reorganization dated as of January 10, 2003 by and among the Registrant, Involve Acquisition Corporation, H2O Networks, Inc., and Dean Hollander, Lance Hollander and
John Dartley                        
|              | 
|2.2(1)       |  | Agreement and Plan of Merger and Reorganization dated as of September 26, 2003 by and among the Registrant, 5 Winds, Inc., Spencer Hayman, Valerie Myers, Laura Jones, David Hilmer, Matt
Holland and Calendar Media Corporation
|              | 
|2.3(1)       |  | Asset Purchase Agreement dated as of September 25, 2003 by and among the Registrant, VS Asset Acquisition, Inc., VirtualSprockets LLC, Randy Thomas Yeatts, Laura Kittleman Yeatts and David M.
Barach                          
|              | 
|2.4(2)        |  | Agreement and Plan of Merger and Reorganization by and among the Registrant, Sunday Acquisition Corporation, Carol/Trevelyan Strategy Group, Inc. and Dan Carol, Stryder Thompkins, Greg Nelson
and Stuart Trevelyan            
|              | 
|3.2(3)        |  | Amended and Restated Certificate of Incorporation of the Registrant                                                                                                                                                             
|              | 
|3.4(3)        |  | Amended and Restated Bylaws of the Registrant                                                                                                                                                                                   
|              | 
|4.1(3)        |  | Specimen Common Stock Certificate                                                                                                                                                                                               
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                              
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                              
|              | 
|32.1          |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                              
|              | 
|32.2          |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                              

---

| | Confidential treatment has been granted for portions of this exhibit.
|- | ---------------------------------------------------------------------

|(1) | Previously filed with Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-109169) dated December 16, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Previously filed on Current Report on Form 8-K/A on November 3, 2004
|--- | --------------------------------------------------------------------

|(3) | Previously filed with Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-109169) dated December 10, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------



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SIGNATURE



Pursuant to the requirements of the Securities Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



KINTERA, INC.By:

/s/ James Rotherham, C.P.A.James Rotherham, C.P.A.Chief Financial Officer




Date: March 16, 2005



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