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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

(Mark
One)

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

For the fiscal year ended December 31, 2007

OR



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

For the transition period from
 to
.

Commission file number 000-50507

KINTERA, INC.

(Exact name of registrant as specified in its charter)







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

9605 Scranton Rd. Ste. 200

San Diego, CA 92121

(Address of Principal Executive Offices) (Zip Code)

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

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



|                                                      |  |                                          
|----------------------------------------------------- |  | -----------------------------------------
|Title of each class                                   |  | Name of each exchange on which registered
|Common Stock                                          |  | Nasdaq Global Market                     
|                                                      | 
|Rights to Purchase Shares of Series A Preferred Stock |  | Nasdaq Global Market                     

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

None

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ̈    No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act.    Yes  ̈    No þ

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    þ    No  ̈

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ̈     Accelerated filer  ̈    Non-accelerated filer  ̈    Smaller reporting company þ

Indicate by check
mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b2).    Yes  ̈    No þ

The aggregate market value of the registrants common stock held by non-affiliates of the registrant as of the last business day of the
registrants most recently completed second fiscal quarter, based upon the closing sale price of the registrants common stock on June 29, 2007 as reported on the NASDAQ Global Market was $72,907,748. This number excludes shares of
common stock held by executive officers and directors. This calculation does not reflect a determination that such persons are affiliates for any other purposes.

As of February 29, 2008, there were 40,396,605 shares of the registrants common stock outstanding.









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KINTERA INC.

Form 10-K

For the Fiscal Year Ended December 31, 2007

Table of Contents



|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                              |  | Page
|PART I     |  |                                                                                                              |  |     
|Item 1     |  | Business                                                                                                     |  | 3   
|Item 1A.   |  | Risk Factors                                                                                                 |  | 14  
|Item 1B.   |  | Unresolved Staff Comments                                                                                    |  | 24  
|Item 2     |  | Properties                                                                                                   |  | 24  
|Item 3.    |  | Legal Proceedings                                                                                            |  | 24  
|Item 4     |  | Submission of Matters to a Vote of Security Holders                                                          |  | 24  
|           |  |                                                                                                             
|PART II    |  |                                                                                                              |  |     
|Item 5     |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 25  
|Item 7     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 26  
|Item 8     |  | Financial Statements and Supplementary Data                                                                  |  | 38  
|Item 9     |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 38  
|Item 9A    |  | Controls and Procedures                                                                                      |  | 38  
|Item 9B    |  | Other Information                                                                                            |  | 39  
|           |  |                                                                                                             
|PART III   |  |                                                                                                              |  |     
|Item 10    |  | Directors and Executive Officers of the Registrant                                                           |  | 41  
|Item 11    |  | Executive Compensation                                                                                       |  | 45  
|Item 12    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 49  
|Item 13    |  | Certain Relationships and Related Transactions                                                               |  | 51  
|Item 14    |  | Principal Accountant Fees and Services                                                                       |  | 52  
|           |  |                                                                                                             
|PART IV    |  |                                                                                                              |  |     
|Item 15    |  | Exhibits and Financial Statement Schedules                                                                   |  | 52  
|           | 
|Signatures |  |                                                                                                             

TRADEMARKS AND TRADE NAMES

Kintera, the Kintera logo, Kintera Sphere, Friends Asking Friends, Kintera Thon, Fundware, Kintera Connect and P!N are our trademarks, trade names or
service marks. Each trademark, trade name or service mark of another company appearing in this Annual Report belongs to its holder, and does not belong to us.



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CAUTIONARY STATEMENT

This Annual Report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as expects, anticipates,
intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of
identifying forward-looking statements in this Annual Report. Additionally, statements concerning future matters such as the development of new products, sales levels, expense levels and other statements regarding matters that are not historical are
forward-looking statements.

Although forward-looking statements in this Annual Report reflect the good faith judgment of our
management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the
results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading Risk
Factors in Item 1A, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We undertake no
obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this
Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

PART I

Item 1. Business

Overview

We are a leading provider of software as a service to help organizations quickly and easily reach more people, raise more money and run more efficiently. Based on the nonprofit sectors evolving market needs, we
offer a comprehensive software platform, with functionality such as donor management, accounting and e-communications, and an open application integration platform that enables organizations to create best of breed solutions to meet their unique
needs. Many of the more than two million U.S. nonprofit organizations registered with the Internal Revenue Service use Internet software tools to enhance their fundraising and communication efforts. According to the ePhilanthropy Foundation,
online giving in the U.S. has continued to rise from $250 million in 2000 to more than $6.87 billion in 2007. We were incorporated in Delaware on February 8, 2000, and we changed our name to Kintera, Inc. on July 31, 2000.

Business Model

In the evolving and increasingly
competitive nonprofit landscape, organizations confront many challenges including:



| |  |  | Growing revenue while facing rapidly expanding competition for existing donors;
| | - |  | -------------------------------------------------------------------------------



| |  |  | Capturing large donation growth with limited cost;
| | - |  | --------------------------------------------------



| |  |  | Managing information and analysis for growing constituent record base; and
| | - |  | --------------------------------------------------------------------------



| |  |  | Integrating systems and processes to effectively use data organization-wide;
| | - |  | ----------------------------------------------------------------------------

To address these challenges in the nonprofit sector, we provide our flagship software as a service (SaaS) technology platform, Kintera
Sphere, which is accessed via Web browser and developed specifically for the needs of nonprofits. Our unified platform offers comprehensive functionality for nonprofits to manage



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e-marketing, communications, programs, services and online fundraising from a single system. Kintera Sphere enables volunteers, members, donors and staff to
share real-time data and information to foster a sense of community and achieve common goals.

Our Kintera Sphere technology platform is
comprised of three key elements:



| |  |  | Our engagement marketing functionality, which enables organizations to engage constituents and donors using capabilities such as Web sites, e-mail, advocacy and
events to communicate, fundraise and build online interactive communities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our Web-based donor management and CRM system, which enables nonprofits to better manage, develop and track relationships and information regarding donors, members,
prospects and volunteers; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our fund accounting solution, which helps relieve nonprofits of the complexities of financial management.
| | - |  | ---------------------------------------------------------------------------------------------------------

In addition, we offer wealth profiling and screening services, which enable organizations to easily find, profile, monitor and rank the wealth in their
constituent databases. These services are available both via our technology platform, as well as on a standalone basis.

LOGO

Delivered via the Internet, our SaaS technology platform enables nonprofits to benefit from the technology and
cost advantages associated with a shared, multi-tenant environment. By subscribing to our software as a service, clients do not need to make large and potentially risky upfront investments in software, additional hardware, extensive implementation
services and additional IT staff. Our clients benefit from reduced time to deploy, lower cost of ownership, reliable cost forecasting, and security and reliability.

We believe that Kintera Sphere enables nonprofits of all sizes to leverage the Internet to improve fundraising and communication efforts. Our platform offers the flexibility for nonprofits to only use the applications
they need while providing the opportunity to use additional applications as their business needs change and grow. Data is collected and stored in one unified database, available in applications currently used by the client as well as those the
client may use in the future. All product applications can be easily activated and accessible online to the customer with a simple, Web-based interface.



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Our clients pay upfront and periodic service fees to access our technology platform. Client contracts are
typically one or two years in duration, although some may span three or more years. Clients only pay for applications they use, enabling organizations to expand their use of Kintera products at any time in the future. In addition to our Kintera
Sphere technology platform, we provide transaction processing services for the fundraising clients using our platform. These clients also pay transaction-based fees tied to the donations and purchases we process. A typical client contract includes
selection of products purchased, as well as additional purchased services, such as transaction processing, training, customer support and implementation services.

We believe that our technology platform and services are integral to the operational success of our nearly 3,900 active customers. Since our inception, more than $1 billion has been raised online using Kintera Sphere
and more than $5 billion has been raised online and offline combined. We continue to better meet the business and technology needs of nonprofits with the availability of Kintera Connect, our open application integration platform, launched in 2007.
Kintera Connect offers nonprofits the ability to choose applications from both enterprise and nonprofit providers that integrate with our technology platform to best meet their organizational needs. The resulting application integrations are more
time-efficient and cost-effective for nonprofits than traditional multi-vendor approaches.

Revenue from upfront service fees is recognized
over the period during which the services are performed. We recognize transaction processing fee revenue as it is earned. Total online donations processed for 2007 was $402.3 million, compared to $316.8 million in 2006. In addition, Fundware
consulting service revenue is recognized when the services have been delivered, and software license revenue is recognized when the license is delivered. Sphere consulting is deferred until the services are delivered and amortized over the remaining
life of the agreement.

LOGO



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In order to provide our customers with superior service and support, we incur costs including
personnel-related expenses for operations, database, implementation and support services, as well as data costs and amortization of software. We also incur costs relating to customer acquisition, including personnel-related expenses for our sales,
marketing and customer support functions, as well as public relations, advertising and promotional costs.

Our Strategy

Our mission is to provide technology and services for nonprofits to quickly and easily reach more people, raise more money and run more effectively. We
accomplish this by offering technology that maximizes the value of constituent records for our client organizations through the following strategic initiatives:



| |  |  | Unite online and offline constituent activity in one central platform
| | - |  | ---------------------------------------------------------------------

Traditionally, nonprofits have maintained multiple databases for offline activities, such as direct mail and telemarketing, and online
activities, such as Web sites and e-mail. This has resulted in both duplicate and incomplete constituent records, failing to offer nonprofits a comprehensive, holistic view of constituents. By providing one unified technology platform designed for
both online and offline activity, we offer nonprofits a centralized database to collect, store, analyze and ultimately, use data about constituents. As a result, nonprofits have a more complete understanding of a constituents relationship with
the organization and can use data received from one initiative, such as a Web site, to achieve better results for another initiative.

We believe that providing a comprehensive view of constituents  combining both online and offline involvement  helps maximize the value of constituent records, resulting in increased revenue for our
clients.



| |  |  | Provide actionable knowledge of constituents capacity and propensity to give
| | - |  | -----------------------------------------------------------------------------

In addition to providing a comprehensive view of constituents using internally gathered information, such as data collected via a Web site
or an event registration, we also offer clients the opportunity to better understand constituents through external resources.

Nonprofits struggle to identify the best prospects for their fundraising initiatives. It is estimated that the top five percent of an organizations donors, members and volunteers will likely make up over 80 percent of its total
giving. As the pool of constituents and potential prospects rises, nonprofits need an effective way to both gather and mine the right data to find the most qualified individuals.

Our wealth screening solution, Kintera P!N, provides nonprofits with comprehensive and accurate constituent wealth information, along with
the tools and services to turn the data into the actionable knowledge needed for fundraising success.

We believe that
providing actionable knowledge of a constituents capacity, affinity and propensity to give helps maximize the value of that constituent record, resulting in a greater number of donations for our clients. We experienced a 27% year-over-year
increase in donations processed, from $316.8 million in 2006 to $402.3 million in 2007.



| |  |  | Enable nonprofits to cost-effectively communicate with constituents in a personalized, meaningful way
| | - |  | -----------------------------------------------------------------------------------------------------

As the fundraising landscape becomes increasingly competitive, nonprofits are challenged to gain mindshare and capture donations, when
constituents often receive multiple solicitations on a monthly, if not weekly basis. We provide nonprofits with the technology and services to help them reach the right constituent with the right message at the right time.

Kintera Sphere enables nonprofits to segment their constituent database by interests and other variables, sending customized
communications to constituents based on their preferences. In addition, the



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cost-effectiveness of our e-communication solutions allows nonprofits to strengthen relationships with constituents using vehicles such as educational
articles, success stories and advocacy campaigns without necessitating a fundraising solicitation with each initiative. As a result, organizations develop better relationships with constituents who become more connected and ultimately, more inclined
to give.

We believe that providing technology to deliver compelling, personalized communication enables nonprofits to
engage and involve more constituents leading to an increased number of contact records in an organizations database. We also believe that understanding the interests and preferences of constituents  and then delivering targeted content
based on this information  helps maximize the value of constituent records.



| |  |  | Enable nonprofits to expand constituent database by leveraging existing networks and contacts
| | - |  | ---------------------------------------------------------------------------------------------

Tapping into a nonprofit organizations existing constituent database can be one of the quickest, easiest and most cost-effective
ways to expand its reach to new potential contacts, volunteers, members and donors. We were the first software provider in the nonprofit sector to offer friends asking friends or tell-a-friend capabilities to help
organizations leverage the power of the Internet within their existing database.

Our Friends Asking Friends Kintera Thon
application empowers a nonprofits event participants to become fundraisers and recruiters on its behalf, which facilitates exponential growth in donations and participation levels. In addition, Kintera Sphere features other opportunities for
an organizations constituents to contact and engage friends, family and colleagues, such as advocacy campaigns, e-newsletter subscriptions, Web site registration, and e-commerce.

We believe that providing the technology for nonprofits to leverage their existing database to expand their reach and contact list helps
maximize the value of those existing constituent records.



| |  |  | Offer nonprofits the power to choose the solutions that best meet their unique needs via an open platform
| | - |  | ---------------------------------------------------------------------------------------------------------

Each nonprofit maintains different operational functions and priorities; as a result, the one size fits all solutions
prevalent in the nonprofit software sector do not typically meet the unique technology and business needs of nonprofits.

To
meet the nonprofit market demand for open platforms and choice, we believe that we are the first software provider in our industry to offer nonprofits an open application platform. Our open platform, Kintera Connect, is home to a set of standardized
tools that give nonprofit organizations the ability to:



| |  |  | Integrate our donor management solutions with external systems;
| | - |  | ---------------------------------------------------------------



| |  |  | Customize its database application functionality and user interface; and
| | - |  | ------------------------------------------------------------------------



| |  |  | Extend beyond traditional CMS capabilities for nonprofits to take advantage of Web 2.0 technologies.
| | - |  | ----------------------------------------------------------------------------------------------------

Over 40 partners from both the enterprise and nonprofit sectors have joined Kintera Connect, including Lending Club, Multicast,
InvisibleCRM and Echopass. We believe that offering nonprofits the freedom to choose integrated solutions provides access to additional technologies that further maximize the value of their constituent records.

Our Products and Services

The Kintera Platform

Our integrated Kintera Sphere technology platform enables nonprofit volunteers, members, donors and staff to share real-time data and
information to better manage constituent relationships, foster a sense of community and achieve common goals. Kintera Sphere features a suite of applications for nonprofits to manage e-marketing, communications, programs, services and online
fundraising.



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Key applications of Kintera Sphere include:



| |  |  | Content Management System (CMS)  Our content management system enables nonprofit organizations to build and manage Web sites optimized for
community-building and fundraising.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Donor Management/Constituent Relationship Management (CRM)  We provide a comprehensive donor management system to help nonprofits better manage
relationships with donors, improve fundraising results, work with greater oversight of donor activities and histories, and plan and execute financial development efforts.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | E-communication  Our system helps nonprofits manage sophisticated and targeted e-mail campaigns with efficiency and control. Comprehensive real-time
reports are available to help organizations make more strategic data-driven decisions for future e-mails to their database.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Friends Asking Friends® Kintera Thon  Our
online events fundraising software solution supports our clients walkathon and other team fundraising events. Nonprofits can quickly and easily launch an online event ranging from regional to national that uses our Friends Asking
Friends technology.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Kintera Wealth Screening

Our Kintera P!N service is a wealth profiling and screening service that enables nonprofits to more efficiently identify, profile, monitor and rank the
wealth of prospects in their databases. Additionally, this service enables nonprofits to edit, analyze, prioritize and combine external data collected from a wide range of sources with its internal donor database. We rank prospects based on our
three-pronged approach, which analyzes the following elements:



| |  |  | Capacity Assessment  Prospects can be matched to more than 18 databases to identify wealth and capacity indicators to help target prospects.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Affinity Rating  One of the strongest predictors of future involvement coupled with capacity data so that the best prospects for the future giving may
be targeted.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Propensity Rating  Compares likely prospects to an industry model of likely donors to different types of organizations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

Kintera Fund Accounting

Kintera
FundWare accounting software unites accounting, budgeting and reporting tools with an audit trail to create an award-winning product suite designed to reduce an organizations financial management pressures. Our accounting software is marketed
to nonprofit organizations and government entities, including cities, towns, governmental agencies and schools.

Our accounting software is
designed to help relieve the complexities of nonprofit and government financial management with:



| |  |  | Tools to help comply with Financial Accounting Standards Board (FASB) and Governmental Accounting Standards Board (GASB) 34 reporting
requirements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Easy tracking of commitments and encumbrances;
| | - |  | ----------------------------------------------



| |  |  | Real-time budget monitoring to help prevent overspending;
| | - |  | ---------------------------------------------------------



| |  |  | Budget modification histories, including comparisons between actual and revised budgets;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Cross-fiscal year budget preparation; and
| | - |  | -----------------------------------------



| |  |  | Built-in audit trails and easy-to-prepare audit schedules.
| | - |  | ----------------------------------------------------------



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Donor Advised Fund

In recent years, donor advised funds (DAFs) have been embraced by donors as a flexible tool that helps simplify and coordinate charitable giving. Prominent investment companies have enhanced the visibility of DAFs,
leading donors to rapidly adopt donor advised funds as a key element of their charitable programs.

We offer Web-based administration
services that provide organizations with a turnkey solution for quick-to-implement, cost-effective, private-labeled DAF capability. Our service seamlessly integrates the DAF program into an organizations existing Web presence and online
operations. In addition, our DAF program handles all ongoing back-office operations of an organizations private-labeled DAF, including accounting and reconciliation, sub-accounting and data interfacing.

Kintera Connect

In 2007, we launched
the industrys first open application integration platform, which enables organizations to use technologies such as e-commerce, short message services (SMS) or call center technology, that easily extend and integrate with our solutions.
Nonprofits can access and utilize the technologies directly or work with any of our over 40 industry leading partners in both the enterprise and nonprofit technology sectors to choose solutions that best meet their unique organizational needs. Our
Kintera Connect platform offers:



| |  |  | Developer-friendly interface with well documented and supported APIs;
| | - |  | ---------------------------------------------------------------------



| |  |  | Extensive partner network offering best of breed solutions;
| | - |  | -----------------------------------------------------------



| |  |  | Unlimited possibilities to meet unique technology and business needs; and
| | - |  | -------------------------------------------------------------------------



| |  |  | Cost-effective approach to custom application development and integration.
| | - |  | --------------------------------------------------------------------------

Additional Kintera Services

We have
a complete customer service offering for clients, designed to support their internal staff as well as their donors, supporters, volunteers and sponsors. Our service offerings include customer support, account management, project management, creative
services, database integration and support, FundWare services, consulting and strategic services, and training.

Benefits of Product and Service
Offerings

Nonprofit Organizations Use Kinteras Online Solutions to Increase Donations

Customers implement our Kintera Sphere technology platform to increase donations by improving the effectiveness of their fundraising efforts. Our software
solution enables nonprofit organizations to use the Internet for every phase of the fundraising process, from prospecting and cultivation to solicitation and stewardship. Our clients are able to increase donations by:



| |  |  | Networking, identifying and ranking qualified prospects to target for fundraising efforts;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Driving further engagement and cultivating relationships with constituents through events, e-marketing and advocacy initiatives; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effectively managing constituents at every phase of the fundraising process using comprehensive information stored and analyzed in a single, integrated system.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Because our software tools are designed specifically for use by nonprofit organizations, our customers are able to
integrate Kintera Sphere into their existing workflow and processes. This ease of integration enables nonprofit organizations to establish online giving as a new source of donations that adds to existing fundraising efforts.



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Our Software as a Service Model Reduces Fundraising Costs

By offering our software as a service, we provide a flexible solution that meets the needs of our customers and minimizes their implementation and
maintenance costs. In exchange for a monthly service fee, our customers receive access to our platform of specialized nonprofit applications via the Internet. Customers can reduce their upfront implementation costs and match the cost of our services
with their event donations by paying for our service, in part, with transaction-based fees. Because we host and manage our software, customers can reduce or eliminate the difficulty and expense of software and hardware installations, upgrades and
technical support. Our frequent product updates are available automatically when customers access our software.

Kintera Sphere is
cost-effective for our customers because it is a shared, multi-tenant software service. We maintain our software, hardware and transaction processing with redundancy in centralized locations. By sharing the costs of our infrastructure and support,
customers receive more favorable rates than would be possible if we provided packaged software or customized, individually-hosted solutions. We believe that under this model we automate many of the more time-consuming services of a nonprofit
organizations information technology department. We offer an outsourced solution for critical but expensive needs such as security, redundancy and scale as well as provide 24/7 support for employees, volunteers and donors.

Scalable Transaction Engine Improves and Simplifies Payment Processing

Our platform incorporates an integrated transaction processing engine that enables donors to make donations and purchases through simple secure online
transactions. We accept all major credit cards, PayPal, the Automated Clearing House network (ACH) and up to 200 currencies. When a donor makes a donation or purchase on a Web site powered by our technology platform, we typically collect
the payment and related information, clear the transaction, provide a receipt to the donor and remit the funds to the nonprofit organization net of any credit card or other payment method fees and a Kintera transaction fee. Donor data generated from
online transactions is automatically integrated into the nonprofit organizations database. Because we process a significant volume of transactions, we are typically able to secure lower credit card transaction fees and more enhanced account
services for our clients than would be possible for them on a stand-alone basis. Our payment processing services also include 24/7 access to financial networks, collection of donations paid by check to lock boxes, account reconciliation, multiple
layers of security and database management. These services are complex to establish and expensive to maintain, particularly for smaller nonprofit organizations or local branches of large organizations that experience lower or intermittent
transaction volumes.

Powerful Database Software Enhances Data Analysis, Collection and Management

Prior to implementing our technology platform, many of our customers maintained multiple isolated databases that supported a range of fundraising and
other activities. These separate databases make data collection and analysis difficult. Our unified Kintera Sphere platform enables automated data collection through volunteer and donor data entry and real-time tracking of their activities,
eliminating cumbersome and inaccurate manual processes. Our software platform aggregates the collected data in a sophisticated, comprehensive database. Using our reporting tools, nonprofit organizations and their volunteers are able to access the
database for fundraising and other activities that support the organizations cause. Because data collected by our platform is stored in a central database, we believe our customers are able to more effectively analyze the success of their
fundraising operations, and active campaigns can be monitored and managed on a day-to-day basis.

Combine Online and Offline Data to
Maximize the Value of Constituent Records

Kintera Sphere enables nonprofit organizations to strategically integrate existing direct
mail, telemarketing and communications programs with their e-mail and Web site to maximize fundraising effectiveness. Our platforms communication and donor management tools enable nonprofit organizations and their volunteers to effectively
manage e-mail campaigns and publish e-newsletters using personalization and market segmentation.



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Key content in an e-mail or Web page can be tagged; allowing organizations to track content viewed and build a profile of their interests. Future content
delivered to the consumer can be based on these prior identified areas of interest. Alternatively, consumers can select areas of interest. This information is stored in their constituent record to define future content delivered to them. By
designing effective communications, nonprofit organizations can acquire and renew donors or members and minimize fundraising costs. In addition, by using our platform for their direct marketing campaigns, nonprofit organizations can analyze the
results of such campaigns to learn about the behavior and interests of their donors, and improve the effectiveness of future campaigns.

Payment
Processing

Kintera Sphere features payment processing capabilities that enable consumers to make donations and purchase goods and
services using numerous payment options through secure online transactions. Credit card transactions are processed with automatic fail-over through redundant paths, including redundant frame relay lines to separate payment processors. In addition,
an Internet gateway is available as an alternate backup mechanism to maintain transaction processing, and we have retained the capability to batch transactions for future processing in the event of backup failure. These layers of redundancy offer
high levels of reliability for large-scale online fundraising. We are able to process online checking transactions through ACH and are integrated with PayPal. We accept all major credit cards and up to 200 currencies, and provide the specific
government-required receipts to donors. Typically, once the donors credit card is charged for the amount of the donation and we have deducted fees owed to us by the customer, the net amount of the donation is delivered to the customer.

Customers

We have customers in each
of the vertical markets within the nonprofit industry. As of December 31, 2007 we had approximately 3,900 active customers. These organizations include health and human services, educational, faith-based, political and public policy
organizations that use Kintera Sphere as well as governmental and nonprofit organizations that use our Fundware accounting solutions.

Sales and
Marketing

We sell our software services primarily through our direct sales force, with sales professionals located at our headquarters
in San Diego and in metropolitan areas throughout the United States. In 2007, we redeployed our field personnel by moving our client-facing sales, services and support teams to a geographically focused model and staffing our major locations,
including Atlanta, Boston, Dallas, Denver, New York, San Diego, San Francisco and Washington, DC, accordingly. Our sales force consists of two teams, a team focused on smaller customers typically at a local level and a team focused on major accounts
both locally and nationally. As of December 31, 2007, our total sales, marketing and customer support organization consisted of 91 employees. Our sales efforts for major accounts typically target large nationally recognized organizations. We
deploy a multi-disciplined sales team consisting of sales, technical and support professionals that can address all aspects of our technology platform and its integration into a nonprofit organizations workflow and fundraising or service
efforts. Our senior management also takes an active role in these sales efforts. To enhance our opportunities for increased sales to major accounts, we often rely on references from existing customers or develop a pilot or custom demonstration.

In selling to smaller customers, we typically target nonprofit organizations in need of an event solution or other point solution. This
sales force makes extensive use of e-mail and telemarketing to identify potential customers with such needs. In many cases, our small customers are independent chapters affiliated with larger nonprofit organizations. We believe the sale of event or
point solutions is an extremely effective method for introducing our platform to small customers who may develop into major accounts. Occasionally, this sales force



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sells more extensive solutions to smaller customers. As part of our growth strategy, we continually seek to expand small event contracts into large
enterprise-wide contracts. The account managers are a critical part of this process.

We complement our direct sales force through our
Kintera Partner Program, a network of nearly 200 companies that increase business opportunities through the development and implementation of new technologies, products and service offerings. These independent companies  representing a broad
range of expertise and various industry affiliations  provide nonprofits with the highest levels of technical expertise, strategic thinking and hands-on skills to help optimize their investment in Kintera technology. We provide four different
opportunities for companies to participate:



| |  |  | Kintera Connect Partners  This new partner program is comprised of leading application partners in both the nonprofit and enterprise sectors. As a verified
Kintera Connect Partner, organizations will have the ability to develop and implement innovative solutions that help nonprofits close the gaps in their technology and business needs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Referral Partners  Our Referral Partner Program is an opportunity for companies to broaden their market reach within the nonprofit sector. These companies
develop Kintera technology expertise to create new opportunities within their existing client base, as well as find new clients.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Solution Providers  Our Solution Providers (resellers) are trained and certified to market and sell Kinteras full suite of solutions, and help
nonprofits manage their marketing communications, programs, services, fundraising and accounting.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consulting Partners  Our Consulting Partner Program is designed to empower firms with the tools and technology to support their clients most ambitious
projects without developing custom Web site applications or integrating different technologies. Our Consulting Partners can deploy our comprehensive, unified technology platform to meet their clients needs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Competition

The market for our products and services
is fragmented, competitive and rapidly evolving, and there are limited barriers to entry for some aspects of this market. As a result, we expect to encounter new and evolving competition as this market becomes aware of the advantages of online
technology for fundraising programs and services. We mainly face competition from four sources:



| |  |  | Traditional fundraising methods;
| | - |  | --------------------------------



| |  |  | Custom-developed solutions;
| | - |  | ---------------------------



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------

We compete with the traditional methods of fundraising and membership service delivery to which volunteers and staff of nonprofit organizations is
accustomed. We believe we compete successfully against traditional methods of fundraising and membership service delivery because such methods are more costly and less efficient than our solutions. We also compete with custom-developed solutions for
online giving and other online communities created either by the technical staff of the nonprofit organization or outside custom service providers. In many cases, building a custom solution requires a nonprofit organization to deploy extensive
financial and technical resources. Often, the legacy database and software system were not designed to support the advanced needs of the Internet and the legacy system ultimately does not meet the customers needs. Also, because we sell our
software as a service, we believe it provides a more flexible solution that meets the needs of customers, minimizes their upfront and ongoing costs, and reduces the need for technical support at the nonprofit organization.



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We face competition from companies that offer specialized software designed to address the needs of
businesses across a variety of industries, such as content or customer management software programs, e-commerce solutions and other products that compete with a portion of our unified service offerings. We believe that we compete successfully
against these companies because our platform provides highly innovative features that have been specifically created for the workflow of nonprofit organizations and provide a unified, database-driven system. Finally, there are other companies that
offer integrated software solutions designed to address the needs of nonprofit organizations. We believe that we compete effectively against these companies due to our technically advanced product, our track record with leading nonprofit
organizations and our reputation for being the innovator in the field.

We believe that the principal competitive factors in our market
include service features, integration, reliability, security, price, ease of use, installation, maintenance and upgrades. We believe that we compete favorably with respect to all of these factors.

Research and Development

We have made substantial
investments in research and development. Our SaaS model provides us with the ability to bring new functionality to the market quickly. As of December 31, 2007 we had 57 employees working on research and development. Our research and development
costs for the years ended December 31, 2007 and 2006 were $6.3 million and $9.3 million, respectively.

Technology and Architecture

Service Infrastructure

We have a highly redundant,
robust and scaleable network infrastructure. All connections are fully meshed and designed. We use only carrier class providers and facilities. All critical systems are fully backed by vendor support agreements and rapid replacement contracts.

All of our production servers are housed within an offsite datacenter. The datacenter has emergency lighting, fire and water controls,
which provide detection, notification, and protection. The data center also has HVAC temperature control systems with separate cooling zones. All systems are actively monitored by the Network Operations Center. The server rooms electrical
power is supplied via an Uninterruptible Power Supply (UPS), which is tested regularly and is further supported by redundant, stand-by, diesel powered generators. In addition, we also have a backup data center at a secondary off-site facility in the
event of natural or other disaster.

Security

All sensitive data contained within the databases is encrypted and securely stored, both in transit and at rest. A number of administrative and technical security controls are maintained by our operations team. These include but are not
limited to:



| |  |  | Enterprise security policies, standards, guidelines, and procedures;
| | - |  | --------------------------------------------------------------------



| |  |  | Various access control devices including firewalls, ACLs, VPNs and segmented networks;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Intrusion detection systems;
| | - |  | ----------------------------



| |  |  | IT Automation, Compliance and Configuration Management System;
| | - |  | --------------------------------------------------------------



| |  |  | Anti-virus and patch management systems; and
| | - |  | --------------------------------------------



| |  |  | Logging, auditing, and monitoring systems that are reviewed regularly.
| | - |  | ----------------------------------------------------------------------

Operations

Our systems are monitored 24x7. System monitoring software is employed throughout our
environment. Our monitoring software is configured to be layered and redundant which ensures that alerts, system performance, and statistics are both automatic and readily available to the proper channels within the organization.



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Alerts related to system information and/or availability are sent via multiple channels (Internet,
intranet, management network, mobile devices) to ensure that time sensitive messages are received promptly. Non-critical system alerts and messages are sent to the email accounts and electronic pagers of the appropriate personnel.

Our operating team employs numerous tools that continually assess the performance and capacity of our applications. We recognize that potentially
unexpected and disruptive events can pose significant risks to its business processes. In order to help us prepare for, respond to, and recover from such events, we maintain business continuity and disaster recovery plans. These plans outline the
steps necessary for continuing our critical and essential business functions.

We manage changes to applications and systems according to a
defined methodology that has been communicated to and is followed by all members of the operations team. Our change management methodology ensures that changes to our environment are properly authorized, tested, approved, implemented, and documented
and that the system can be updated when required in a manner that continues to provide for system availability, security, and integrity.

Employees

As of December 31, 2007, we had 281 employees, including 98 in professional services and support, 91 in sales and marketing, 57 in
product development and support and 35 in general and administrative. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good.

Available Information

We file reports with the
Securities and Exchange Commission (SEC). We make available on our website under Investor Relations/SEC Filings, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. Our website address is www.kintera.com. You can also read and copy any materials we file with the SEC at the
SECs Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site
(www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

Item 1A. Risk Factors

Before deciding to purchase, hold or sell our common stock, you should carefully
consider the risks described below in addition to the other cautionary statements and risks described elsewhere, and the other information contained, in this Report and in our other filings with the SEC, including our subsequent reports on Forms
10-Q and 8-K. 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 deem immaterial may also affect our business. If any these known or unknown
risks or uncertainties actually occur with material adverse effects on Kintera, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock will likely decline and you
may lose all or part of your investment.

Risks Related to 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 December 31, 2007, we had an accumulated deficit
of $144 million. We incurred net losses of $16 million for the year ended December 31, 2007 and net losses of $33 million for the year ended December 31, 2006. We will



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need to increase revenue and reduce operating expenses to achieve profitability, and we may not be able to do so. If our revenues or gross margins fall below
budget or we are not able to raise additional capital through equity or debt financing, we will need to scale back our expenditures through reductions in our workforce and other reductions in our operations. Such reductions could prevent us from
increasing our market share, capitalizing on new business opportunities or remaining competitive in our industry. 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 may also fail to accurately estimate our operating expenses, and if our operating expenses exceed our expectations, our financial performance will be adversely affected.

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
revenue and operating expenses. For example, our revenue increased to $45 million for the year ended December 31, 2007, from $41 million for the year ended December 31, 2006 while our net loss decreased to $16 million for the year ended
December 31, 2007, from $33 million for the year ended December 31, 2006. Although we have implemented plans to help reduce our overall operating expenses and will continue to do so, operating expenses may increase in the future to the
extent that we expand our selling and marketing activities and hire additional personnel. Our revenue in any period depends substantially on monthly service fees, on the number and size of donations that we process in that period for customer
sponsored fundraising events and on the sale and licensing of our software products. In addition, the number and size of transactions we process tends to be seasonal, with the first calendar quarter representing the seasonal low for non-profit
fundraising. As a result, it is possible that in some future periods, our revenue 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 we are an early stage company, it is difficult to evaluate our
prospects.

We incorporated in February 2000 and first achieved meaningful revenue in 2001. As a result, we have encountered and
likely will continue to encounter risks and difficulties associated with 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 are our principal source of revenue, and we may not successfully introduce new services and enhance existing services of Kintera
Sphere;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | we may not effectively manage our anticipated growth; and
| | - |  | ---------------------------------------------------------



| |  |  | our plan to reduce operating expenses and focus on core activities, including the related reduction in our workforce, may disrupt our customer relationships.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

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



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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, concerns about fraud, privacy, reliability and other problems may cause some 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 primarily sold our Kintera Sphere solution to nonprofit organizations in the
health and human services, faith based and education 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
additional benefits that can be achieved through the entire suite of applications available in 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.

In 2005, we began 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 solutions 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.

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

Since commencing operations in 2000, we have experienced significant growth, and we anticipate that expansion will continue to be required
to address potential market opportunities. There can be no assurance that our infrastructure will be sufficiently scalable to manage any future growth. For example, growth may 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 increased volume, our operating results 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. In addition, we will need to provide additional sales and support services if we achieve our
anticipated growth with respect to the sale and implementation of Kintera Sphere. In March 2007, we announced and began implementation of a restructuring program, including a workforce reduction, as a means to reduce ongoing operating expenses. The
restructuring program consisted of the elimination of approximately 16% of our workforce, the restructuring of our sales compensation plan, the elimination of certain lines of business and the abandonment of certain long-lived fixed assets. The
restructuring program was completed as of June 30, 2007. Thus, we will be required to service any growth in sales and support services with a reduced workforce. Failure to properly manage an increase in customer demands could result in a
material adverse effect on customer satisfaction, our ability to perform on new contracts and on our operating results.

Any failure
to manage and accurately account for the 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 of maintaining these internal controls, and 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 obtain an independent attestation of internal controls of
Kintera Sphere which is issued as a SAS70 Type II Report.



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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 revenue depends on the amount 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. We may be unable to effectively upgrade and expand our systems or to integrate smoothly any new technologies with our existing systems. We expect to continue to upgrade our Kintera Sphere system to
improve its donor management capabilities. In addition, we will be introducing enhanced versions of our accounting system software in both a client server and software as a service version. Any inability to do so would have an adverse effect on our
ability to maintain customer relationships and grow our business.

Our products may contain defects, which may result in liability
and/or decreased sales.

Software products frequently contain errors or failures, especially when first introduced or when new
versions are released. Despite our best efforts to test our products, we might experience significant errors or failures in our products, or they might not work with other hardware or software as expected, which could delay the development or
release of new products or new versions of our products and adversely affect market acceptance of our products. We might not discover software errors that affect our new or current products or enhancements until after they are deployed, and we may
need to provide enhancements to correct such errors. These errors could result in:



| |  |  | harm to our reputation;
| | - |  | -----------------------



| |  |  | lost sales;
| | - |  | -----------



| |  |  | delays in commercial release;
| | - |  | -----------------------------



| |  |  | product liability claims;
| | - |  | -------------------------



| |  |  | delays in or loss of market acceptance of our products; and
| | - |  | -----------------------------------------------------------



| |  |  | unexpected expenses and diversion of resources to remedy errors.
| | - |  | ----------------------------------------------------------------

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. Uncertainties about the
timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our development expenses. In addition our Connect Partners may not be able to interface existing applications with
Kintera Sphere or develop new applications that would interface with Sphere. 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.



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Historical acquisitions and potential 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. In prior years, we completed acquisitions of several complementary businesses as part of our business strategy, and several of those acquisitions
did not provide the anticipated benefits. We may also acquire companies, services and technologies in the future 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;
| | - |  | --------------------------------------------------------



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



| |  |  | inability to generate sufficient revenue 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.

If we are unable to detect and prevent unauthorized use of credit cards and bank account numbers 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. We
maintain PCI compliance and obtain an independent attestation of internal controls of Kintera Sphere which is issued as a SAS70 Type II Report. We may have to spend significant money and time maintaining these controls in order to protect from
unauthorized credit card use.

If we are unable to safeguard confidential donor data, our reputation may be harmed and customers may
be reluctant to use our service.

Advances in computer capabilities, new discoveries in the field of cryptography, or other events
or developments, such as a system failure or unanticipated events in the case of data integration, 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 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 and
certain services we provide are subject to various governmental regulations. In addition, we may be subject to the privacy provisions of the



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Gramm-Leach-Bliley Act and related regulations. Pending and enacted legislation at the state and federal levels, including those related to fundraising
activities, may also restrict further our information gathering and disclosure practices, for example, by requiring us to comply with extensive and costly registration, reporting or disclosure requirements. 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 compliance 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 revenue 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, including our new primary off site data center which became operational in January 2008, 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 or failure in the course of data
integration. 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 or loss of data. In addition, our backup data facility may not be
operational on a timely basis or subject to similar natural disaster or other unexpected problems. Our business interruption insurance may not be sufficient to compensate us for losses that may occur. Interruptions in our service could harm our
reputation and reduce our revenue and profits.

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 revenue in that quarter, as well as subsequent quarters over which
revenue 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 revenue.

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

We have derived the substantial majority of our historical revenue from fees paid by nonprofit organizations related
to their use of Kintera Sphere, and we anticipate that Kintera Sphere will account for an increasing portion of our revenue in future periods. The fees we receive for Kintera Sphere include upfront fees that nonprofit organizations pay for the right
to access 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 revenue in each quarter is deferred revenue from contracts entered into
and paid for during previous quarters. Because of this deferred revenue, the revenue we report in any quarter or series of quarters may mask significant downturns in sales and the market acceptance of Kintera Sphere.



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

Our ability to generate increased revenue depends in part upon the ability and willingness of our
strategic partners to increase awareness of our solution to their customers and provide implementation services. 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 revenue.

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 Richard LaBarbera, our President and Chief Executive Officer. Our executive officers and key personnel 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.

In the past year we have experienced a significant transition in our
executive management team. Historically, we have also experienced a high rate of employee turnover at all levels. Our newly-hired employees have not worked with our new executive management team and finance personnel for a significant length of
time, and we cannot assure you that these management transitions will not result in some disruption of our business. If our new executive management team and finance department are unable to work together effectively to implement our strategies,
manage our operations and accomplish our objectives, our business, operations and financial results could be severely impaired.

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 successfully meet our objectives, we must continue to attract and retain highly qualified sales and software development personnel with specialized
skill sets focused on the nonprofit industry. In addition, we have experienced a high level of employee turnover, and 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. Competition for qualified sales and software development personnel can be intense. Because the sale of online fund raising solutions is still relatively new, the
pool of qualified personnel with experience working with or selling to nonprofit organizations is limited and there is a shortage of sales personnel with the experience we need. Our recent restructuring and workforce reduction may also make it more
difficult to attract and retain qualified personnel. Our ability to meet our sales objectives will depend in part on our ability to recruit, train and retain top quality people with advanced skills who understand sales to nonprofit organizations. 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 revenue and not achieve our planned growth.

Our failure to compete successfully against current or future competitors could cause our revenue 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;
| | - |  | ------------------------------------------------------------------------------------------



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| |  |  | 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, many of the companies we compete with may have greater financial, technical and marketing resources,
generate greater revenue and have better name recognition than we do. These competitive pressures could cause our revenue and market share to decline.

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. As of December 31, 2007, we have four issued patents and eight 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 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 revenue and prospects for growth.

Litigation may
harm our business or otherwise distract our management.

Substantial, complete or extended litigation could cause us to incur large
expenditures and distract our management. For example, lawsuits by employees, stockholders or customers could be very costly and substantially disrupt our business. Disputes from time to time with such companies or individuals are not uncommon, and
we cannot assure you that we will always be able to resolve such disputes on terms favorable to us.

Risks Related to the Securities Markets and
Ownership of Our Common Stock

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;
| | - |  | ----------------------------------------------------------------



| |  |  | 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;
| | - |  | ---------------------------------------



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| |  |  | 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 conditions.
| | - |  | ----------------------------

In
addition, the stock market in general, the Nasdaq Global 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, shareholder derivative lawsuits and securities class action litigation have 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.

Our publicly-filed reports are reviewed from time to time by the SEC, and any significant changes or amendments required as a result of any such review may result in material liability to us and may have a material adverse impact on
the trading price of our common stock.

The reports of publicly-traded companies are subject to review by the SEC from time to time
for the purpose of assisting companies in complying with applicable disclosure requirements, and the SEC is required to undertake a comprehensive review of a companys reports at least once every three years under the Sarbanes-Oxley Act of
2002. SEC reviews may be initiated at any time. While we believe that our previously filed SEC reports comply, and we intend that all future reports will comply, in all material respects with the published rules and regulations of the SEC, we could
be required to modify, amend or reformulate information contained in prior filings as a result of an SEC review. Any modification, amendment or reformulation of information contained in such reports could be significant and result in material
liability to us and have a material adverse impact on the trading price of our common stock.

If we fail to maintain an effective
system of internal controls, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our operating
results could be misstated, our reputation may be harmed and the trading price of our stock could be negatively affected. In connection with the audit of our financial statements for the year ended December 31, 2006, we identified material
weaknesses in our controls related to the recognition of revenue. We have implemented actions to address these weaknesses and to enhance the reliability and effectiveness of our internal controls and operations, and our management has concluded that
there are no material weaknesses in our internal controls over financial reporting as of December 31, 2007. However, there can be no assurance that our controls over financial processes and reporting will be effective in the future or that
additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.

Any failure to
remediate any future material weaknesses or implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material
misstatements in our financial statements or other public disclosures. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our
stock.

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 founders, Harry Gruber, Allen Gruber, Dennis Berman and entities affiliated with them, own, in
the aggregate, approximately 22.5% of our outstanding common stock as of February 29, 2008. As a result, these



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persons, acting together, have the ability to exercise significant influence over the outcome of all matters submitted to our stockholders for approval,
including the election and removal of directors and any significant transaction involving us. 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; 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 and our other product and service offerings;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | 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 of 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 need to scale back our expenditures through reductions in
our workforce and operations, and 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.

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, including provisions authorizing the board of directors to issue preferred stock, prohibiting
stockholder action by written consent and requiring advance notice for nominations for election to our board of directors or for proposing matters to be acted upon by stockholders at meetings of our stockholders. In addition, our certificate of
incorporation, as amended, and bylaws, as amended, also provide that our board of directors is classified into three classes of directors, 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 otherwise provide our stockholders with a premium over the then current market price for their shares.

In addition, on January 25, 2006, we adopted a stockholder rights plan (Rights Plan). Pursuant to the Rights Plan, our board of
directors declared a dividend distribution of one preferred share purchase right (Right) on each outstanding share of our common stock. Each Right will entitle stockholders to buy one one-hundredth of a share of a newly created Series A
Preferred Stock at a purchase price of $50.00, subject to adjustment, in the event the Right becomes exercisable. Subject to limited exceptions, the Rights will become



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exercisable if a person or group acquires more than 15% or more of our common stock or announces a tender offer for 15% or more of our common stock. If we
are acquired in a merger or other business combination transaction which has not been approved by our board of directors, each Right will entitle its holder to purchase, at the Rights then-current purchase price, a number of the acquiring
companys common shares having a market value at the time of twice the Rights exercise price. The Rights Plan may discourage certain types of transactions involving an actual or potential change in control and may limit our
stockholders ability to approve transactions that they deem to be in their best interests. As a result, these provisions may depress our stock price.

We are also 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 premium over the then current market price for their shares.

Changes in, or interpretations of, accounting rules and regulations could result in unfavorable accounting charges or require us to change our
compensation policies.

Accounting methods and policies, including policies governing revenue recognition, expenses, accounting for
stock options and in-process research and development costs are subject to further review, interpretation and guidance from relevant accounting authorities, including the Securities and Exchange Commission. Changes to, or interpretations of,
accounting methods or policies in the future may require us to reclassify, restate or otherwise change or revise our financial statements, including those contained in this report.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We lease approximately 38,000 square feet in San Diego, California, for our
corporate headquarters and principal offices. We also lease space in Denver, Colorado; Eugene, Oregon; and San Francisco, California. We currently lease offices in Washington DC, which are currently being sublet for the duration of our lease.

We believe that our facilities will be suitable and adequate for the present purposes, and that the productive capacity in such facilities
is substantially being utilized.

Item 3. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising
out of our operations. As of the date of this Annual Report, we are not a party to any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition, operating results
or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

On December 31, 2007 we held a Special
Meeting of Stockholders, which was then adjourned until January 14, 2008 in order to provide additional time to obtain stockholder votes. At that meeting the Companys stockholders voted to amend the 2003 Equity Incentive Plan to increase
the maximum aggregate number of



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shares that may be issued thereunder by 1,000,000 to 10,550,000. The results of the vote on this proposal were as follows:



|                  |  |                |  |             |  |                 
|----------------- |  | -------------- |  | ----------- |  | ----------------
|Affirmative Votes |  | Negative Votes |  | Abstentions |  | Broker Non-Votes
|22,269,112        |  | 1,509,529      |  | 20,004      |  | 0               

Our stockholders also voted to amend the 2000 Stock Option Plan, the 2003 Equity Incentive Plan
and the 2004 Equity Incentive Plan (Fundware) to authorize the Compensation Committee of the Board of Directors to effect a repricing of outstanding stock options under these plans prior to January 14, 2009. The results of the vote on this proposal
were as follows:



|                  |  |                |  |             |  |                 
|----------------- |  | -------------- |  | ----------- |  | ----------------
|Affirmative Votes |  | Negative Votes |  | Abstentions |  | Broker Non-Votes
|22,098,971        |  | 1,683,653      |  | 16,021      |  | 0               

PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------

Market Information

Our common stock has been traded
on the NASDAQ Global Market under the symbol KNTA since December 19, 2003. Prior to that time, there was no public market for our common stock. The following table sets forth the range of high and low sales prices on the NASDAQ
Global Market of our common stock for the periods indicated.



|                              |  |         |      |         |   |          |  |         |      |      |   |      |  |   |     
|----------------------------- |  | ------- | ---- | ------- | - | -------- |  | ------- | ---- | ---- | - | ---- |  | - | ----
|Quarter Ended                 |  | Mar. 31 |      | June 30 |   | Sept. 30 |  | Dec. 31 |      | Year
|Fiscal year 2006              |  |         |      |         |   |          |  |         |      |      |   |      |  |   |     
|Common stock price per share: |  |         |      |         |   |          |  |         |      |      |   |      |  |   |     
|High                          |  | $       | 3.03 |         | $ | 1.99     |  | $       | 2.02 |      | $ | 1.74 |  | $ | 3.03
|Low                           |  |         | 1.36 |         |   | 1.06     |  |         | 1.39 |      |   | 1.15 |  |   | 1.06
|                              |  |         |      |         |  
|Fiscal year 2007              |  |         |      |         |   |          |  |         |      |      |   |      |  |   |     
|Common stock price per share: |  |         |      |         |   |          |  |         |      |      |   |      |  |   |     
|High                          |  | $       | 1.84 |         | $ | 2.24     |  | $       | 2.40 |      | $ | 1.83 |  | $ | 2.40
|Low                           |  |         | 1.18 |         |   | 1.55     |  |         | 1.66 |      |   | 1.42 |  |   | 1.18

As of February 29, 2008, there were 40,396,905 holders of record of our common stock. On
February 29, 2008, the last sale price reported on the NASDAQ Global Market for our common stock was $0.94 per share.

Dividend Policy

We have never declared or paid any cash dividends on our common stock and do not anticipate paying such cash dividends in the
foreseeable future. We currently anticipate that we will retain all of our future earnings for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the
discretion of our board of directors and will depend upon our results of operation, financial condition and other factors as the board of directors, in its discretion, deems relevant.

Recent Sales of Unregistered Securities

None.

Repurchases of Equity Securities

We did not
repurchase any shares of our common stock during the fiscal quarter ended December 31, 2007.

Securities Authorized for Issuance Under Equity
Compensation Plans

See Part III, Item 12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters for the securities authorized for issuance under equity compensation plans.



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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

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-K. 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, in Item 1A under the caption Risk Factors, and the audited consolidated financial statements and related notes included in this Annual Report filed on Form 10-K. Risk factors that
could cause actual results to differ from those contained in the forward-looking statements, include but are not limited to: our limited operating history; our history of losses; our dependence on increased acceptance by nonprofit organizations of
online fundraising; lengthy sales cycles for major customers; our need to manage growth; risks associated with accounting for and processing large amounts of donations; the rapidly changing technologies and market demands; and other risks identified
in this Annual Report on Form 10-K.

Overview

We are a leading provider of donor management, engagement and accounting solutions that enable nonprofit organizations (NPOs) to leverage the Internet to increase donations, reduce fundraising costs, improve
operations and build awareness and affinity for their causes by bringing employees, volunteers and donors together in online, interactive communities. Our flagship product, Kintera Sphere, is managed as a single system and offered to NPOs as a
service accessed with a web browser. NPOs pay Kintera service fees for access to Kintera Sphere and transaction-based fees tied to the donations and purchases.

As of December 31, 2007 we had approximately 3,900 active customers.

Sources of Revenue

We generate the majority of our revenue from arrangements with nonprofit organizations related to their use of Kintera Sphere to manage their websites,
special events and membership, organize individuals, advocate causes, raise major gifts, deliver services and programs and execute personalized marketing campaigns. We primarily enter into customer contracts for Kintera Sphere that are one year or
more in duration. Our customers pay us upfront fees and periodic service fees for access to Kintera Sphere, and transaction-based fees tied to the donations and purchases we process. Revenue from upfront service fees is deferred and recognized as
revenue over the entire term of our contracts. Revenue from transaction processing fees is recognized as it is earned. Total online donations processed were $402.3 million, $316.8 million and $303.0 million for the years ended December 31,
2007, 2006 and 2005, respectively. Revenue from service plan, maintenance and support associated with Kintera Sphere represented approximately 44% and 49% of our total net revenue in 2007 and 2006, respectively. Revenue from data services
represented approximately 25% and 22% of our total net revenue in 2007 and 2006, respectively. We also enter into service contracts and implementation contracts related to Kintera Sphere that are 12 months or longer in duration.

We also generate revenue from our wealth profiling business, which 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. Wealth profiling services are sold in connection with Kintera Sphere as well as on a stand alone basis. Revenue from the wealth profiling business
arise primarily from three sources: (1) Kintera Sphere access or software licensing; (2) post contract support services of the software licenses; and (3) consulting services and related data processing fees.

Our 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. We recognize



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revenue from the awareness campaign business primarily from four sources: (1) Kintera Sphere access or software licensing; (2) website development
and customization; (3) messaging services (email/fax); and (4) consulting services.

We also generate revenue through the sale of
our fund accounting software. Revenue from this operation is derived from perpetual license fees for the accounting software package, as well as related product support, professional services, outsourced payroll services and transaction fees.

Our top ten customers generated an aggregate of 20% of our total net revenue for the year ended December 31, 2007. No customer
generated greater than 10% of total net revenue in 2007 or 2006.

Cost of Revenue and Operating Expenses

Cost of Revenue. Cost of revenue includes salaries, benefits and related expenses of operations and database support and implementation and support
services, as well as data costs and amortization of software. Gross profit represents net revenue less the costs of revenue. Gross profit percentage is highly dependent on contract agreements, donation volume and overhead allocations. We do not
believe that historical gross profit margins are a reliable indicator of future gross profit margins.

Sales and Marketing Expenses.
Sales and marketing expenses consist primarily of salaries, commissions, stock-based compensation, benefits and related expenses of personnel engaged in selling, marketing and customer support functions, as well as public relations, advertising and
promotional costs.

Product Development and Support Expenses.Product development and support expenses consist primarily of salaries
and related costs of employees engaged in engineering, development and quality assurance activities, stock-based compensation, subcontracting costs and facilities expenses.

General and Administrative Expenses.General and administrative expenses consist primarily of personnel-related expenses, stock-based
compensation, depreciation, legal and other professional fees, facilities and communication expenses and information technology expenditures.

Amortization of Purchased Intangibles Expense. Amortization of purchased intangibles expense (excluding amortization of software recorded in Cost of Revenue) consists of costs associated with the acquired intangibles such as contact
list, customer files, etc. that are expensed using the straight-line method over the estimated useful lives of three to five years.

Restructuring Charges Expense. Restructuring charges expense consists of costs associated with the March 2007 restructuring program, including termination benefits, asset impairments and gains on disposal of product lines.

Business Enterprise Segments

In
accordance with Statement of Financial Accounting Statements (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information,we are required to report financial and descriptive information about our
reportable operating segments. We identify our operating segments based on how management internally evaluates separate financial information, business activities and management responsibility. We operate in one reportable operating segment:
software and service provider to not-for-profit organizations.

Critical Accounting Policies and Estimates

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



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reported amounts of assets, liabilities, revenue 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, goodwill, intangible assets, stock-based compensation 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 accounting policies relating to the
following areas to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment:



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



| |  |  | allowance for doubtful accounts;
| | - |  | --------------------------------



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



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



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



| |  |  | accounting for restructuring charges.
| | - |  | -------------------------------------

Revenue Recognition. The Company derives revenue from fees paid by nonprofit organizations related to the use of Kintera Sphere as well as from the Companys service offerings for wealth profiling and screening, advocacy
campaigns and directed giving, from licenses of the Companys prepackaged accounting software and from multiple element arrangements that may include any combination of these items. Revenue is recognized in accordance with the provisions of SEC
Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, 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). Billings made or payments received in advance of providing services are deferred until the period these services are provided. If at the outset of an arrangement it is determined that the arrangement fee is not
fixed or determinable, revenue is deferred until the arrangement fee becomes due. If at the outset of an arrangement it is determined that collectibility is not probable, revenue is deferred until the receipt of payment.

For arrangements with multiple elements, revenue recognition is based on the individual units of accounting determined to exist in the arrangement. A
delivered item(s) is considered a separate unit of accounting when the delivered item(s) has value to the customer on a stand-alone basis, there is objective and reliable evidence of the fair value of the undelivered item(s) and, if the arrangement
includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control. In determining whether the deliverable has stand-alone value we
consider whether they are sold separately by any vendor, the customer could resell the item on a stand-alone basis, the timing of when multiple contracts are signed for the same customer, and the contractual dependence of the subscription revenue on
the customers satisfaction with the other deliverables. Fair value of an item is generally the price charged for the product when regularly sold on a stand-alone basis. When objective and reliable evidence of fair value exists for all units of
accounting in an arrangement, arrangement consideration is generally allocated to each unit of accounting based upon their relative fair values. In those instances when objective and reliable evidence of fair value exists for the undelivered item(s)
but not for the delivered items, the residual method is used to allocate arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered item(s) equals the total arrangement consideration less
the aggregate fair value of the undelivered item(s). When the Company is unable to establish stand-alone value for delivered item(s) or when fair value of



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an undelivered item(s) has not been established, as currently is the case for the upfront payments for activation, implementation, maintenance, and use of
Kintera Sphere, a single unit of accounting is deemed to exist and revenue is generally recognized on a straight-line basis over the entire term of the arrangement. When contingent payments are received for the elements the Company recognizes these
payments over the remaining term of the arrangement. Cost associated with the activation and implementation is deferred and recognized over the life of the arrangement.

To date, the arrangements that contain multiple elements have been contracts that include upfront payments for activation fees received, data screening arrangements, periodic fees for the maintenance and use of the
Companys software, professional services and transaction fees tied to the donations and purchases that are processed. Revenue associated with the upfront payments is deferred and recognized when those services are delivered. Revenue related to
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 revenue in accordance
with Emerging Issues Task Force (EITF) consensus on Issue 99-19. Reporting Revenue Gross as a Principal verses Net as an Agent.

Revenue from software licenses and related installation, training and consulting services is recognized in accordance with the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2,
Software Revenue Recognition, as modified by SOP 98-4. License revenue is generally recognized up-front upon delivery of the licensed software, with arrangement consideration allocated to the license element using the residual method. This
methodology is used when there is vendor-specific objective evidence (VSOE) of fair value for the remaining deliverables and when the remaining services to be provided do not involve the significant production, modification or
customization of the licensed software. If VSOE 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. Revenue from postcontract
customer support services is recognized separately on a straight-line basis over the term of the support period. VSOE for postcontract customer support services is based on customer renewal rates. Revenue from installation, training and consulting
services is generally recognized separately as the services are performed. VSOE for installation, training and consulting services is based on the normal pricing practices for those services when regularly sold on a stand-alone basis. In order for
the installation, training and consulting services to be accounted for separately, sufficient VSOE must exist to permit allocation to the various elements of the arrangement, the services must not be essential to the functionality of any other
element of the transaction and the services must be described in the contract such that the total price of the arrangement would be expected to vary as a result of the inclusion or exclusion of the services. For arrangements with services that are
essential to the functionality of the software but do not involve the significant production, modification or customization of the licensed software, the license and related service revenue are recognized upon the latter of the delivery of the
license and the completion of the services, with the residual method utilized for the remaining elements in the contract. If the services involve the significant production, modification or customization of the licensed software, contract accounting
is applied to both the software and service elements included in the arrangement in accordance with the provisions of SOP 81-1, Accounting for Performance of Construction Type and Certain Production Type Contracts. To date, license and
service revenue recognized pursuant to SOP 81-1 has not been significant.

In accordance with EITF Issue No. 01-9, Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the Vendors Product, the Company accounts for cash consideration (such as sales incentives) that is given to customers or resellers as a reduction of revenue rather than as an
operating expense unless the Company receives a benefit that can be identified and for which the fair value can be reasonably estimated.

Allowance for doubtful accounts.We maintain an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of our clients to make required payments. We analyze accounts receivable,
historical percentages of uncollectible accounts and changes in payment history when evaluating the adequacy of the allowance for doubtful accounts. We use an internal collection effort, which may include our sales and services groups as we deem
appropriate, in our collection efforts. Although we believe that our reserves



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are adequate, if the financial condition of our clients deteriorates, resulting in an impairment of their ability to make payments, additional allowances may
be necessary, which will result in increased expense in the period in which such determination is made.

Accounting for Goodwill and
Other Intangible Assets.Goodwill and other intangible assets require us to make determinations about the value and recoverability of those assets that involve estimates and judgments. We have made several acquisitions of businesses and assets
that resulted in both goodwill and intangible assets being recorded in our financial statements. We have typically paid most of the acquisition prices in these transactions through the issuance of equity securities. The value of the equity
securities prior to our initial public offering in December 2003 was determined through comparison to the issuance prices received in private placement transactions.

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. The amounts and useful lives assigned
to other intangible assets impact the amount and timing of future amortization, and the amount assigned to in-process research and development is expensed immediately. The value of our intangible assets, including goodwill, could be impacted by
future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks, including the valuation of our common stock, (iii) any failure to meet the performance
projections included in our forecasts of future operating results. We evaluate goodwill and other purchased intangible assets deemed to have indefinite lives, on an annual basis in the fourth quarter or more frequently if we believe indicators of
impairment exist. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair
value of each reporting unit. In fiscal 2007, in accordance with SFAS No. 142, management determined that there was only one reporting unit to be tested. The goodwill impairment test compares the implied fair value of the reporting unit with
the carrying value of the reporting unit. The implied fair value of goodwill is determined in the same manner as in a business combination. Determining the fair value of the implied goodwill is judgmental in nature and often involves the use of
significant estimates and assumptions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of any such charge. Estimates of fair value are primarily determined
using discounted cash flows and market comparisons. These approaches use significant estimates and assumptions, including projection and timing of future cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth
rates, determination of appropriate market comparables, and determination of whether a premium or discount should be applied to comparables. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the
original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

For fiscal 2007, we
evaluated goodwill for impairment in the fourth quarter. The discounted cash flows for the reporting unit were based on discrete one-year financial forecasts developed by management for planning purposes. Cash flows beyond the discrete forecasts
were estimated using terminal value calculations. The median five-year compounded annual growth rate of earnings was 16.3% during the discrete forecast period and the future cash flows were discounted to present value using a discount rate of 20%
and residual growth rates of 5%.

We did not recognize any goodwill impairment as a result of performing these tests. A variance in the
discount rate or the estimated revenue growth rate could have a significant impact on the estimated fair value of the reporting unit and consequently the amount of identified goodwill impairment.

We also assess the impairment of our long-lived assets when events or changes in circumstances indicate that an assets carrying value may not be
recoverable. An impairment charge is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying value of the asset. An impairment charge would be measured by comparing the amount by which the carrying value
exceeds the fair value of the asset being evaluated for impairment. In connection with the restructuring program we have identified certain fixed assets with a net carrying value of $70,000 as of December 31, 2006 which were abandoned
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excess depreciation associated with the revision to depreciable lives recorded in the three months ended March 31, 2007 amounted to approximately
$54,000 and is included in restructuring charges in the condensed consolidated statement of operations. These fixed assets were written off as of March 31, 2007.

Accounting for Software Development Costs. We account 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 (SOP 98-1). 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 cost of revenue in the accompanying consolidated statements of operations. The Company reviews the software that has been capitalized for
impairment on a yearly basis, or otherwise as conditions might arise that would require a review. For the years ended December 31, 2007 and 2006, we recognized $18,000 and $577,000 of impairment losses for projects terminated, respectively. The
impairment loss is included in operating expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2007 and 2006 we capitalized $729,000 and $861,000 of internal development costs associated with
internal use software, respectively.

We account 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 cost of revenues in the accompanying consolidated statements of operations. We periodically review the software that has been capitalized for
impairment. We review the software that has been capitalized for impairment on a yearly basis, or otherwise as conditions might arise that would require a review. For the years ended December 31, 2007 and 2006 we did not recognize any
impairment loss for projects terminated. For the years ended December 31, 2007 and 2006 we capitalized $286,000 and $0 of internal development costs associated with software to be sold, leased or otherwise marketed, respectively.

Accounting for Stock-Based Compensation Expense. We account for Stock-Based Compensation Expense in accordance with SFAS No. 123,
Share-Based Payment (revised 2004) (SFAS 123(R)). In accordance with SFAS 123(R), stock-based compensation is measured at the fair value of the award and recognized as expense during the requisite service period of the awards. For
the years ended December 31, 2007 and 2006 we recognized $3,349,000 and $4,572,000 of stock-based compensation expense, respectively.

Accounting for Restructuring Charges. We account for restructuring costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires that costs associated with exit or
disposal activities generally be recognized when they are incurred rather than at the date of commitment to an exit or disposal plan. For the year ended December 31, 2007 we recognized $2,274,000 of restructuring charges.



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Results of Operations

Comparison of results for the years ended December 31, 2007 and 2006

The following table
sets forth certain Consolidated Statements of Operations data expressed as a percentage of net revenue for the periods indicated:



|                                      |  |                         |    |  |       |   
|------------------------------------- |  | ----------------------- | -- |  | ----- | --
|                                      |  | Years endedDecember 31, |   
|                                      |  | 2007                    |    |  | 2006  |   
|Net revenue                           |  | 100.0                   | %  |  | 100.0 | % 
|Cost of revenue                       |  | 35.3                    |    |  | 44.8  |   
|                                      |  |                         |    |  |       |   
|Gross profit                          |  | 64.7                    |    |  | 55.2  |   
|Operating expenses:                   |  |                         |    |  |       |   
|Sales and marketing                   |  | 43.1                    |    |  | 61.9  |   
|Product development and support       |  | 14.1                    |    |  | 22.7  |   
|General and administrative            |  | 33.2                    |    |  | 46.0  |   
|Amortization of purchased intangibles |  | 5.4                     |    |  | 7.3   |   
|Restructuring charges                 |  | 5.0                     |    |  |      |   
|                                      |  |                         |    |  |       |   
|Total operating expenses              |  | 100.8                   |    |  | 137.9 |   
|                                      |  |                         |    |  |       |   
|Loss from operations                  |  | (36.1                   | )  |  | (82.7 | ) 
|Interest income, net                  |  | 2.0                     |    |  | 2.2   |   
|                                      |  |                         |    |  |       |   
|Loss before income taxes              |  | (34.1                   | )  |  | (80.5 | ) 
|Provision for income taxes            |  | 1.0                     |    |  | 0.1   |   
|                                      |  |                         |    |  |       |   
|Net loss                              |  | (35.1                   | )% |  | (80.6 | )%
|                                      |  |                         |    |  |       |   

Net Revenue, Cost of Revenue and Gross Profit

The following table presents net revenue, cost of revenue and gross profit for the years ended December 31, 2007 and 2006:



|                |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |        |   |  |       |  
|--------------- |  | --------------------------------- | ------ | -------------- | --------------------------- | - | ------ | ------------------ | -------------- |  | ------- | - |  | - | ------ | - |  | ----- | -
|                |  | Year EndedDecember 31, 2007       |        |                | Year EndedDecember 31, 2006 |   |        | Increase(Decrease) |                |  | %Change |  
|                |  | Amount                            |        | % ofNetRevenue |                             |   | Amount |                    | % ofNetRevenue |  |         |  
|                |  | (in thousands, except percentage) |       
|Net revenue     |  | $                                 | 44,935 |                | 100.0                       | % |        | $                  | 41,103         |  | 100.0   | % |  | $ | 3,832  |   |  | 9.3   | %
|Cost of revenue |  |                                   | 15,851 |                | 35.3                        |   |        |                    | 18,394         |  | 44.8    |   |  |   | (2,543 | ) |  | (13.8 | )
|                |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |        |   |  |       |  
|Gross profit    |  | $                                 | 29,084 |                | 64.7                        | % |        | $                  | 22,709         |  | 55.2    | % |  | $ | 6,375  |   |  | 28.1  | %
|                |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |        |   |  |       |  

The following tables present the components of net revenue for years ended December 31, 2007
and 2006. The following line items represent revenue related categories that are consistent with the way management classifies its revenues internally and may not be representative of those categories as defined by AICPA SOP No. 97-2, as
modified by SOP 98-4, and EITF No. 00-21.



|                                      |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |        |   |  |       |   
|------------------------------------- |  | --------------------------------- | ------ | -------------- | --------------------------- | - | ------ | ------------------ | -------------- |  | ------- | - |  | - | ------ | - |  | ----- | --
|                                      |  | Year endedDecember 31, 2007       |        |                | Year endedDecember 31, 2006 |   |        | Increase(Decrease) |                |  | %Change |  
|                                      |  | Amount                            |        | % ofNetRevenue |                             |   | Amount |                    | % ofNetRevenue |  |         |  
|                                      |  | (in thousands, except percentage) |       
|Service plan, maintenance and support |  | $                                 | 19,722 |                | 43.9                        | % |        | $                  | 19,961         |  | 48.5    | % |  | $ | (239   | ) |  | (1.2  | )%
|Transaction and usage                 |  |                                   | 12,872 |                | 28.6                        |   |        |                    | 9,769          |  | 23.8    |   |  |   | 3,103  |   |  | 31.8  |   
|Services                              |  |                                   | 11,079 |                | 24.7                        |   |        |                    | 9,110          |  | 22.2    |   |  |   | 1,969  |   |  | 21.6  |   
|License                               |  |                                   | 1,262  |                | 2.8                         |   |        |                    | 2,263          |  | 5.5     |   |  |   | (1,001 | ) |  | (44.2 | ) 
|                                      |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |        |   |  |       |   
|Net revenue                           |  | $                                 | 44,935 |                | 100.0                       | % |        | $                  | 41,103         |  | 100.0   | % |  | $ | 3,832  |   |  | 9.3   | % 
|                                      |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |        |   |  |       |   



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Net Revenue.Our revenue is generated principally by fees paid by nonprofit organizations related
to their use of our software and services. Net revenue is revenue less reductions for discount and provisions for allowances and credit card fees. The preceding tables present net revenue from each of our revenue streams and their respective
contribution to the increase in net revenue for the years ended December 31, 2007 and 2006, respectively.

Service plan, maintenance
and support revenue consists primarily of activation, hosting and use of our Kintera Sphere software as a service (SaaS) offering as well as software maintenance and support revenue for our Fundware software installations. Net revenue
from service plan, maintenance and support of $19.7 million in 2007 was consistent with the $20 million in 2006.

Transaction and usage
revenue consists of the fees charged for processing of donations and other usage related services such as emails, faxes and other measurable activities. Net revenue from transactions and usage increased 31.8% from $9.8 million in 2006 to $12.9
million in 2007 driven by an increase in donations processed and the increase in average processing fee rate.

Services revenue consists of
revenue generated from the implementation services that are performed by our services personnel on behalf of customers, professional services and consulting, billable support services, and wealth screening data services. Depending on the nature of
the contract, this revenue may be deferred and amortized over the contract period or may be recognized upon delivery. Net revenue from services increased by 21.6% from $9.1 million in 2006 to $11.1 million in 2007 driven by the timing of delivery
and ratable recognition of data services over the life of the contract.

License revenue consists primarily of Fundware packaged software
sales and advertising and access to Masterplanner online content. Net revenue from license and subscriptions decreased 44.2% to $1.3 million in 2007 from $2.3 million in 2006, primarily due to a decline in Fundware software license sales and the
elimination of Masterplanner advertising and subscriptions in 2007.

Cost of Revenue and Gross Profit. Cost of revenue decreased by
13.8% to $15.9 million in 2007 from $18.4 million in 2006. Gross margins for the years ended December 31, 2007 and 2006 were 64.7% and 55.2%, respectively. The decrease in cost of revenue and increase in margin was primarily the result of
a decrease of $4.7 million in personnel related costs driven by a focus on operational efficiencies and restructuring of our support organization and a decrease of $0.5 million related to an increase in deferred costs driven by implementations which
were not completed in 2007, offset in part by an increase of $1.9 million related to the conversion of our data center, an increase of $0.6 million of cost associated with the delivery of two large contracts in 2007, an increase of $0.1 million
related to the use of subcontractors for implementations and in increase of $0.1 million of depreciation related to capital expenditures in 2007.

Operating Expenses

The following table presents sales and marketing, product development and support, general and
administrative, amortization of purchased intangibles and restructuring charge expenses for the years ended December 31, 2007 and 2006.



|                                      |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |         |   |  |       |   
|------------------------------------- |  | --------------------------------- | ------ | -------------- | --------------------------- | - | ------ | ------------------ | -------------- |  | ------- | - |  | - | ------- | - |  | ----- | --
|                                      |  | Year endedDecember 31, 2007       |        |                | Year endedDecember 31, 2006 |   |        | Increase(Decrease) |                |  | %Change |  
|                                      |  | Amount                            |        | % ofNetRevenue |                             |   | Amount |                    | % ofNetRevenue |  |         |  
|                                      |  | (in thousands, except percentage) |       
|Sales and marketing                   |  | $                                 | 19,353 |                | 43.1                        | % |        | $                  | 25,450         |  | 61.9    | % |  | $ | (6,097  | ) |  | (24.0 | )%
|Product development and support       |  |                                   | 6,338  |                | 14.1                        |   |        |                    | 9,340          |  | 22.7    |   |  |   | (3,002  | ) |  | (32.1 | ) 
|General and administrative            |  |                                   | 14,910 |                | 33.2                        |   |        |                    | 18,918         |  | 46.0    |   |  |   | (4,008  | ) |  | (21.1 | ) 
|Amortization of purchased intangibles |  |                                   | 2,451  |                | 5.4                         |   |        |                    | 2,996          |  | 7.3     |   |  |   | (545    | ) |  | (18.2 | ) 
|Restructuring charges                 |  |                                   | 2,274  |                | 5.0                         |   |        |                    |               |  |        |   |  |   | 2,274   |   |  | N/A   |   
|                                      |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |         |   |  |       |   
|Total operating expenses              |  | $                                 | 45,326 |                | 100.8                       | % |        | $                  | 56,704         |  | 137.9   | % |  | $ | (11,378 | ) |  | (20.1 | )%
|                                      |  |                                   |        |                |                             |   |        |                    |                |  |         |   |  |   |         |   |  |       |   



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Sales and Marketing Expenses. Sales and marketing expenses decreased to $19.4 million, or 43.1% of
net revenue, in 2007 from $25.5 million, or 61.9% of net revenue, in 2006. The decrease of $6.1 million in selling and marketing expenses was primarily due to a $3.8 million decrease in personnel related costs, a decrease of $1 million in
advertising and marketing related expenses, a decrease of $0.8 million in stock-based compensation expense, a decrease of $0.5 million in travel and travel related expense and a decrease of $0.2 million in consulting and legal fees, offset in part
by an increase of $0.2 million in facilities and communications expenses. The decrease in personnel related costs is primarily the result of changes in sales incentive plans and the numbers of resources supporting the sales function and is not
indicative of a decrease in the number of quota-carrying salespeople.

Product Development and Support Expenses.Product development
and support expenses decreased to $6.3 million, or 14.1% of net revenue, in 2007 from $9.3 million, or 22.7% of net revenue, in 2006. The decrease of $3 million resulted primarily from a decrease of $2 million in personnel related costs, a decrease
of $0.5 million in internal software development expenses related to an increase in the capitalization of software development expense, a decrease of $0.3 million in professional services, a decrease of $0.1 million in stock-based compensation and a
decrease of $0.1 million in travel and travel related expense.

General and Administrative Expenses. General and administrative
expenses decreased to $14.9 million, or 33.2% of net revenue, in 2007 from $18.9 million, or 46% of net revenue, in 2006. The decrease of $4 million resulted primarily from a decrease of $1.4 million in professional services, a decrease of $0.9
million in facilities and communications expenses, a decrease of $0.7 million in depreciation expense, a decrease of $0.4 million in stock-based compensation expense, a decrease of $0.4 million in bad debt expense and a decrease $0.4 million in
personnel related costs, offset in part by a $0.2 million loss on disposal of assets.

Restructuring charges.Restructuring charges
for the year ended December 31, 2007 was $2.3 million or 5% of net revenue, respectively. There were no restructuring charges in the comparable period in 2006.

In March 2007, we announced and began implementation of a restructuring program. The workforce reduction was implemented as a means to reduce ongoing operating expenses by restructuring our operations and reducing our
workforce. The restructuring program was completed as of June 30, 2007. The restructuring program consisted of the elimination of approximately 16% of our workforce, the restructuring of our sales compensation plan, the elimination of certain
lines of business and the abandonment of certain long-lived fixed assets. Restructuring charges for the year ended December 31, 2007 consisted of $1.2 million for termination benefits, inclusive of the $553,000 payable to directors as described
below, $1.3 million of certain intangibles associated with eliminated lines of business and $54,000 in excess depreciation associated with certain abandoned fixed assets. In connection with the restructuring program we disposed of certain product
lines during the year ended December 31, 2007, with such disposals resulting in a net gain of $223,000.

In May 2007, we agreed
to the terms of severance arrangements for Dr. Harry E. Gruber, our former Chief Executive Officer, who continues to serve on our board of directors, and Dennis Berman, our former Executive Vice President who left the board of directors in
July 2007, consistent with terms outlined in principle before they resigned their positions, including the execution of mutual general releases of claims. The severance arrangements with Dr. Gruber and Mr. Berman had a total cost of
approximately $553,000.



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Stock-Based Compensation Expenses

The following table presents details of stock-based compensation expense that is included in certain functional line items above:



|                                |  |                        |       |      |   |      
|------------------------------- |  | ---------------------- | ----- | ---- | - | -----
|                                |  | Year endedDecember 31,
|                                |  | 2007                   |       | 2006
|Cost of revenue                 |  | $                      | 325   |      | $ | 442  
|Sales and marketing             |  |                        | 719   |      |   | 1,237
|Product development and support |  |                        | 397   |      |   | 537  
|General and administrative      |  |                        | 1,908 |      |   | 2,311
|                                |  |                        |       |      |   |      
|                                |  | $                      | 3,349 |      | $ | 4,527
|                                |  |                        |       |      |   |      

Stock-based compensation expense decreased by 26% to $3.3 million for the year ended
December 31, 2007 from $4.5 million for the year ended December 31, 2006. The decrease in stock-based compensation expense is a result of the full vesting and associated cessation of expense recognition for certain options granted prior to
our initial public offering in December 2003.

The total compensation cost related to nonvested awards not yet recognized amounted to $1.7
million at December 31, 2007 and will be recognized over a weighted-average period of 1.3 years. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any
remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards to employees or assume unvested equity awards in
connection with acquisitions.

Liquidity and Capital Resources

We have historically funded our operations principally through sales of equity securities. In December 2003, we completed our initial public offering and received net proceeds of $36.1 million. In July 2004, we sold
2.5 million shares of our common stock in a private placement at a price of $8.00 per share for net proceeds of $18.5 million. In December 2004, we sold 2.5 million shares of our common stock in a private placement at a price of $7.00 per
share for net proceeds of $16.3 million. In December 2005, we sold 4.5 million shares of our common stock in a private placement at a price of $3.00 per share for net proceeds of $12.3 million and issued warrants to purchase 1.8 million
shares of our common stock at an exercise price of $3.50 per share. In December 2006, we sold 4.0 million shares of our common stock in a private placement at a price of $1.25 per share for net proceeds of $4.5 million and issued warrants to
purchase 1.2 million shares of our common stock at an exercise price of $1.60 per share.

Working Capital and Cash and Marketable
Securities. The following table presents working capital and cash and cash equivalents and marketable securities at December 31, 2007 and 2006.



|                          |  |                  |        |   |                  |   |            |  |   |        |  
|------------------------- |  | ---------------- | ------ | - | ---------------- | - | ---------- |  | - | ------ | -
|                          |  | December 31,2007 |        |   | December 31,2006 |   | (Decrease) | 
|                          |  | (in thousands)   |       
|Working capital           |  | $                | (5,023 | ) |                  | $ | 2,839      |  | $ | (7,862 | )
|                          |  |                  |        |   |                  |   |            |  |   |        |  
|Cash and cash equivalents |  | $                | 6,556  |   |                  | $ | 11,548     |  | $ | (4,992 | )
|Marketable securities     |  |                  | 2,848  |   |                  |   | 7,384      |  |   | (4,536 | )
|                          |  |                  |        |   |                  |   |            |  |   |        |  
|                          |  | $                | 9,404  |   |                  | $ | 18,932     |  | $ | (9,528 | )
|                          |  |                  |        |   |                  |   |            |  |   |        |  



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Cash Flows

Operating Activities

Our net cash used in operating activities was $7.4 million for the year ended
December 31, 2007, resulting primarily from the $15.8 million net loss for the year and net working outflows of $1.1 million, which were offset by net non-cash charges of $9.5 million.

Our net cash used in operating activities was $14.5 million for the year ended December 31, 2006, resulting primarily from the $33.1 million net
loss for the year, which was offset by net non-cash charges of $11.2 million and net working inflows of $7.4 million.

At December 31,
2007, we had a working capital deficit of $5 million, compared to working capital of $2.8 million at December 31, 2006. This decrease was primarily a result of cash used in operating activities partially offset by the cash provided by investing
activities described below.

At December 31, 2007, we had net accounts receivable of $4.2 million compared to $6.3 million
at December 31, 2006. Accounts receivable at December 31, 2007 and 2006 represented approximately 34 days and 56 days of revenue, respectively. Terms with individual customers vary greatly; however, we typically require thirty-day terms
from our customers. Our receivables can vary dramatically due to overall sales volumes and due to quarterly variations in donations processed and timing of implementation of services and receipts from large customers and the timing of contract
payments.

Investing Activities

Net
cash provided by investing activities was $2.7 million for the year ended December 31, 2007. This was primarily the result of $15.2 million of sales of marketable securities, offset in part by the purchase of $10.6 million in marketable
securities, additions of $1 million to software development costs and purchases of $0.9 million of property and equipment.

Net cash
provided by investing activities was $13.6 million for the year ended December 31, 2006. This was primarily the result of $20.5 million of sales of marketable securities and a decrease of $0.2 million in other assets, offset in part by the
purchase of $6 million in marketable securities, additions of $0.9 million to software development costs and purchases of $0.3 million of property and equipment.

Financing Activities

Net cash used in financing activities was $0.3 million for the year ended December 31, 2007. This
was primarily the result of $0.6 million of payments under financing arrangements, offset in part by $0.3 million of proceeds from the issuance of common stock under employee stock option and employee stock purchase plans.

Net cash provided by financing activities was $4.2 million for the year ended December 31, 2006. This was primarily the result of $4.5 million of
net cash proceeds from the private placement of securities (net of offering costs) and $0.3 million of proceeds from the issuance of common stock under employee stock option and employee stock purchase plans, offset in part by $0.6 million of
payments under financing arrangements.

We believe that our cash, cash equivalents, short-term investments and anticipated operating cash
flows will be sufficient to meet our planned working capital requirements and contractual commitments for at least the next 12 months. The $5 million deficit in working capital is the result of $16 million of deferred revenue. The relief of the
deferred revenue liability has little effect on anticipated operating cash flows as the cost to recognize that revenue is expected to be low. If we are unable to increase our revenue or substantially decrease our expenses, we will need to raise
additional funds to finance our future capital needs. In addition, if we are unable to meet our operational goals, including our expected revenue targets, 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



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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. If our revenues or gross margins fall below budget and we are unable to raise additional capital through equity or debt financing, we will need to scale back our expenditures through reductions in our workforce and other reductions
in our operations. Such operational reductions could prevent us from increasing our market share, capitalizing on new business opportunities or remaining competitive in our industry.

A portion of our marketable securities are invested in auction rate securities. In February 2008, the auction failed for our $1 million auction rate
security. We believe that we will be able to liquidate the investment in auction rate security without significant loss within the next year, and we currently believe these securities are not significantly impaired as the underlying assets are
generally student loans which are substantially backed by the federal government. Accordingly these auction rate securities are classified as short-term investments on our balance sheet. We have reviewed all other investments as of December 31,
2007 for impairment and concluded that their carrying value approximated their fair value.

Off-Balance Sheet Arrangements

We currently do not believe we 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.

We do not have any off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued
SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We do not expect the adoption of SFAS No. 157 to have a material impact on our consolidated financial
statements. For non-financial assets and liabilities, the adoption of SFAS No. 157 has been deferred until January 1, 2009.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value.
SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 159 to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition
date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation
of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008.
Early adoption is prohibited. We are currently evaluation the potential impact, if any of the adoption of SFAS No. 141 (R) and SFAS No. 160 on our consolidated financial statements.



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Item 8. Financial Statements and Supplementary Data

Our consolidated financial statements at
December 31, 2007 and 2006 and the Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, are included in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T). Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the
Securities Exchange Act of 1934, as amended, (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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 Exchange Act, as they existed on December 31, 2007. The evaluation took into consideration the various changes
in controls and remediation measures that the Company had made prior to December 31, 2007 to address material weaknesses in internal controls over financial reporting that were identified and reported in the Form 10-K filed for the period ended
December 31, 2006 and subsequent Quarterly Reports on Form 10-Q filed prior to and for the quarter ended September 30, 2007. Based on this evaluation, our principal executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective as of December 31, 2007, such that our controls and procedures were adequately designed to ensure that information required to be disclosed by us in our reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control
Over Financial Reporting

In our 2006 Annual Report, we disclosed deficiencies in our internal control over financial reporting, as they
existed as of December 31, 2006. These deficiencies constituted, individually or in the aggregate, material weaknesses in process and transaction controls as defined in the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
framework. These material weaknesses, as they existed on December 31, 2006, and the corresponding remediation measures undertaken by management during 2007, are outlined as follows:

Revenue Recognition



| |  |  | We consolidated all business unit accounting and reporting, including revenue recognition and billing functions, into our existing corporate headquarter process and
control framework;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We required a formal revenue recognition analysis for large contracts, which are reviewed, approved, and signed off by our Controller and Chief Financial Officer,
as well as close and periodic monitoring of the operations and progress of these large contracts to ensure that we can continue to meet our product and service commitments under those contracts;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To address revenue recognition initiation determination challenges relative to multi-element procedures where services are a significant component, we have taken
the following actions: (i) generation of a
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | revenue recognition fact sheet that outlines all relevant contract information necessary to inform proper revenue recognition; (ii) review and
redefinition of our process around revenue initiation criteria in accordance with relevant revenue accounting standards; and (iii) improvement of our professional services management project tracking, communications, and reporting systems.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We hired a full-time employee to fill the position of Director of Accounting who has previous revenue recognition experience. We hired a finance professional to
fill the newly created position of Revenue Manager. This position will assist in the administration, continuing evaluation, and execution of our revenue related activities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Existing revenue recognition processes and controls were reviewed during the second quarter and improvements in processes and updated and improved controls were
identified. Based on these identified improvements, a revised revenue recognition control system was designed with implementation targeted to be complete at the beginning of the third quarter. Actions were taken to improve processing and controls
over recording of customer contracts, contract setup for revenue recognition, improve processes and controls relative to revenue recognition decisions, and improved review of revenue results.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenue recognition training was performed with revenue team members, key members of management and sales people to educate those involved with contracts, revenue
recognition and sales.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The improvements in processes and controls were incorporated into an updated revenue recognition policy and have been incorporated into our testing of internal
controls.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other than the items noted above, we have made no significant changes in our internal controls over financial
reporting during the year ended December 31, 2007 that would materially affect, or are reasonably likely to materially affect our internal controls over financial reporting. As of December 31, 2007, we concluded that the above control
enhancements implemented during 2007 successfully remediated the material weakness related to revenue recognition that was present as of December 31, 2006.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2007 based on the framework in Internal ControlIntegrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO Framework). Based on this evaluation, management concluded that there are no material weaknesses in our internal controls over financial reporting as of December 31, 2007.
Accordingly, management has concluded that the Companys internal control over financial reporting as of December 31, 2007 was effective. A material weakness is defined in Public Company Accounting Oversight Board Standard No. 2 as a
significant deficiency, or combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The material
weakness disclosed as of December 31, 2006 under the Revenue Recognition heading has been remediated as of December 31, 2007. This annual report does not include an attestation report of the Companys registered public accounting firm
regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only
managements report in this annual report.

Item 9B. Other Information

On March 11, 2008, the Compensation Committee of our Board of Directors
approved the following option grants to executive officers under our Amended and Restated 2003 Equity Incentive Plan (the Plan): (i) options to purchase 125,000 shares of common stock were granted to Richard LaBarbera, our Chief
Executive Officer;



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(ii) options to purchase 100,000 shares of common stock were granted to Richard Davidson, our Chief Financial Officer; (iii) options to purchase 75,000
shares of common stock were granted to Scott Crowder, our Chief Technology Officer; and (iv) options to purchase 50,000 shares of common stock were granted to Alexander Fitzpatrick, our Senior Vice President and General Counsel. Vesting of all
shares is contingent upon meeting certain financial targets, such that 100% of the options shall vest upon attainment of certain financial targets for the 2008 fiscal year. If such financial targets are not satisfied for the 2008 fiscal year, 50% of
the options shall expire and the other 50% shall vest only upon attainment of board-approved financial targets for the 2009 fiscal year. In accordance with our option granting practices, the option grants will be effected April 1, 2008, with an
exercise price per share equal to the closing sale price of our common stock as reported on that date.

Also on March 11, 2008, the
Compensation Committee approved amendments to the Executive Employment Agreements with each of Mr. Davidson, Mr. Crowder and Mr. Fitzpatrick, to provide that if within the period two months prior to and two years following a change in control, the
executive resigns for good reason or is terminated without cause, such executive officer will be eligible to receive (i) in a lump sum within fifteen business days after the date of termination, an amount equal to the sum of one hundred percent
(100%) of his base salary in effect at the time of termination and one hundred percent (100%) of the maximum annual bonus for which he is eligible at the time of termination, (ii) health care coverage as in effect on the date of termination for
twelve (12) months and (iii) immediately vesting of one hundred percent (100%) of all restricted stock, unvested stock options and other equity based compensation awards held by him as of the date of such termination.



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##### Table of Contents

PART III

Item 10. Directors and Executive Officers of the Registrant

We have a classified board of directors
currently consisting of three Class I directors, two Class II directors and three Class III directors, who will serve until the annual meetings of stockholders to be held in 2010, 2008 and 2009, respectively, or until their respective successors are
duly elected and qualified. The names, ages and positions of our directors and executive officers as of February 29, 2008 are listed below, together with a brief account of their business experience. There are no family relationships among any
of our directors and executive officers.



|                                      |  |     |  |                                                      |  |              
|------------------------------------- |  | --- |  | ---------------------------------------------------- |  | -------------
|Name                                  |  | Age |  | Position(s)                                          |  | DirectorSince
|Class I directors:                    |  |     |  |                                                      |  |              
|Alfred R. Berkeley III (1)(3)(4)      |  | 63  |  | Chairman of the Board of Directors                   |  | 2003         
|Philip Heasley (1)(3)                 |  | 58  |  | Director                                             |  | 2003         
|Mitchell Tuchman (2)                  |  | 51  |  | Director                                             |  | 2007         
|                                      |  |     | 
|Class II directors:                   |  |     |  |                                                      |  |              
|Robert J. Korzeniewski, C.P.A. (1)(2) |  | 50  |  | Director                                             |  | 2003         
|Deborah D. Rieman, Ph.D. (2)(3)       |  | 58  |  | Director                                             |  | 2003         
|                                      |  |     | 
|Class III directors:                  |  |     |  |                                                      |  |              
|Hector Garcia-Molina, Ph.D. (2)(3)    |  | 54  |  | Director                                             |  | 2003         
|Harry E. Gruber, M.D. (5)             |  | 55  |  | Director                                             |  | 2000         
|Richard LaBarbera (6)                 |  | 59  |  | President, Chief Executive Officer and Director      |  | 2007         
|                                      |  |     | 
|Executive officers:                   |  |     |  |                                                      |  |              
|Richard Davidson                      |  | 44  |  | Chief Financial Officer                              |  |              
|Alexander A. Fitzpatrick              |  | 41  |  | Senior Vice President, General Counsel and Secretary |  |              
|Scott Crowder                         |  | 45  |  | Chief Technology Officer                             |  |              



|(1) | Member of audit committee.
|--- | --------------------------

|(2) | Member of compensation committee.
|--- | ---------------------------------

|(3) | Member of nominating committee.
|--- | -------------------------------

|(4) | Alfred R. Berkeley was appointed chairman of the board of directors on February 8, 2007.
|--- | ----------------------------------------------------------------------------------------

|(5) | As of February 8, 2007, Dr. Gruber resigned as our president and Mr. Berkeley replaced Dr. H. Gruber as chairman of the board of directors. As of
February 28, 2007 Dr. Gruber resigned as our chief executive officer. Dr. Gruber continues to serve on our board of directors.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | On February 8, 2007 Richard LaBarbera, our then current chief operating officer, was appointed to the office of president. On February 28, 2007 Mr. LaBarbera was
appointed to the office of chief executive officer and elected as a director.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Class I Directors (term expires
2010):

Alfred R. Berkeley III, 63, joined Kintera as a director in September 2003 and become chairman of our board of
directors on February 2007. Mr. Berkeley currently serves as chairman and chief executive officer of Pipeline Trading Systems LCC. Mr. Berkeley also serves as a director of ACI Worldwide, Inc. Mr. Berkeley was appointed vice chairman
of the Nasdaq Stock Market, Inc. in July 2000 and served through July 2003. Mr. Berkeley served as president of Nasdaq from 1996 until 2000. From 1972 to 1996, Mr. Berkeley served in a number of capacities at Alex. Brown & Sons,
Inc., including managing director in the corporate finance department where he financed computer software and electronic commerce companies. Mr. Berkeley joined Alex. Brown & Sons, Inc. as a research analyst in 1972 and became a
general partner in 1983. From 1985 to 1987, he served as head of information services for the firm. Mr. Berkeley serves and has served on a number of



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boards of both public and private companies, both for-profit and non-profit. Mr. Berkeley currently serves on the National Infrastructure Advisory
Committee for the President. Mr. Berkeley served as a captain in the United States Air Force from 1968 to 1972. Mr. Berkeley holds a B.A. from the University of Virginia and received his M.B.A. from The Wharton School at the University of
Pennsylvania.

Philip Heasley, 58, joined Kintera as a director in September 2003. Mr. Heasley is currently president and chief
executive officer of ACI Worldwide, Inc., a provider of electronic and related payment services to banks, and has been since March 2005. Prior to that, beginning in 2003, he served as chairman and chief executive officer of Paypower LLC. From 2000
until 2003, Mr. Heasley served as chairman and chief executive officer of First USA Bank, the credit card subsidiary of Bank One Corp. Prior to joining First USA, Mr. Heasley spent 13 years in executive positions at U.S. Bancorp, including
six years as vice chairman and the last two years as president and chief operating officer. Before joining U.S. Bancorp, Mr. Heasley spent 13 years at Citicorp, including three years as president and chief operating officer of Diners Club, Inc.
Mr. Heasley currently serves as a director of Fidelity National Financial, Inc., Public Radio International and Catholic Charities of Minneapolis and St. Paul. Mr. Heasley was the past chairman of the board of directors of Visa USA,
serving in that capacity for six years and also served on the board of directors for Ohio Casualty Corporation and Fair Isaac Corporation. Mr. Heasley holds a B.A. from Marist College and an M.B.A. from Bernard Baruch Graduate School of
Business.

Mitchell Tuchman,51 joined Kintera as a director in May 2007. Mr. Tuchman is currently a sub-advisor to Crestview
Capital since January 2006, helping to oversee the firms $230 million microcap portfolio. From January 2001 to November 2005, Mr. Tuchman served as a consultant and sub-advisor to Apex Capital, LLC (Apex), an Orinda,
California based hedge fund, where he advised on their technology micro-cap and special situations portfolio that grew from $30 million to $200 million. Mr. Tuchman continues to comanage with Apex, Net Market Partners, LP, a $28 million venture
capital fund. From 1997 to 2000, Mr. Tuchman served as a troubleshooter for venture funds, helping venture-backed Internet companies to optimize their business models, develop strategies, consummate key strategic partnerships and raise capital.
He was instrumental in positioning both C2B Technologies for sale to Inktomi and Net Market Makers in their sale to Jupiter Communications. From 1984 to 1997, he led several Silicon Valley companies through strategic transformations as an operating
executive. Mr. Tuchman began his career at Atari, Inc., serving there from 1982 to 1984. Mr. Tuchman currently serves as a board member, sits on the audit committee and chairs the compensation committee for Workstream, Inc., a publicly
traded company listed on the Nasdaq Capital Market. Mr. Tuchman also serves on the boards of directors of two California based charitable organizations, Community Association for Rehabilitation and National Center for Equine Facilitated
Therapy. Mr. Tuchman holds an M.B.A. from Harvard University and a B.S.B.A. from Boston University, graduating with honors and distinction.

Class II Directors (term expires 2008):

Robert J. Korzeniewski, C.P.A., 50, joined Kintera as a director
in September 2003. From 2000 until 2008, Mr. Korzeniewski served as executive vice president, corporate and business development of VeriSign, Inc. From 1996 until 2000, Mr. Korzeniewski served as chief financial officer of Network
Solutions, Inc. Prior to joining Network Solutions, Mr. Korzeniewski held various senior financial positions at SAIC from 1987 until 1996. Mr. Korzeniewski holds a B.S. from Salem State College.

Deborah D. Rieman, Ph.D., 58, joined Kintera as a director in September 2003. Dr. Rieman currently manages a private investment fund. From
July 1995 to December 1999, Dr. Rieman was the president and chief executive officer of CheckPoint Software Technologies, Inc., an Internet security software company. Prior to joining CheckPoint, Dr. Rieman held various executive and
marketing positions with Adobe Systems Inc., a computer software company, Sun Microsystems Inc., a computer networking company, and Xerox Corporation, a diversified electronics manufacturer. Dr. Rieman also serves as a director of
Corning Inc., Keynote Systems, Inc. and Tumbleweed Communications Corporation. Dr. Rieman holds a B.A. from Sarah Lawrence College and received her Ph.D. in mathematics from Columbia University.



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Class III Directors (term expires 2009):

Richard LaBarbera, 59, has served as a director and as our President and Chief Executive Officer since February 2007. Mr. LaBarbera joined the
Company as our Chief Operating Officer in February 2006. Prior to joining the Company, from July 2004 to February 2006 Mr. LaBarbera served as chief operations and services officer at Echopass Corporation, an integrated customer relationship
management (CRM) software company. At Echopass, Mr. LaBarberas responsibilities included client renewals, customer service, professional services, support, custom application development, IT operations and provisioning. From
November 2000 to August 2002, Mr. LaBarbera served as president of Niku Corporation, an enterprise software company now part of Computer Associates, that addresses client needs for CRM, portfolio management, resource and project management, and
IT management and governance. While at Niku, Mr. LaBarbera was responsible for all operational components of the business, including development, marketing, sales, telesales, professional services and support. From October 1997 to November
2000, Mr. LaBarbera served as senior vice president and general manager of Sybase Inc.s (NYSE: SY) enterprise solutions division, which was responsible for approximately $800 million of Sybase revenue. In this role, Mr. LaBarbera had
direct responsibility for product development, product marketing, worldwide sales, support, education and global professional services functions. In addition, LaBarbera has served in executive roles at Siemens Nixdorf/Pyramid, Octel Communications,
Amdahl, Storage Technology Corporation and IBM. Mr. LaBarbera has also served as an advisor and executive consultant to numerous technology companies including Xinify, Value Stream Group and Front Range Solutions. Mr. LaBarbera holds an
M.B.A. from Georgia State University.

Harry E. Gruber, M.D., 55, co-founded Kintera and has served as a director since 2000.
Dr. Gruber served as our President, Chief Executive Officer and Chairman of the Board of Directors until February 2007. Prior to founding Kintera, Dr. Gruber co-founded INTERVU Inc., a publicly held Internet video and audio delivery
company, where he served as the Chief Executive Officer from 1995 to 2000, and which was acquired by Akamai Technologies, Inc. in 2000. In 1986, Dr. Gruber founded Gensia Pharmaceuticals, Inc. (subsequently known as SICOR Inc.
which was acquired by Teva Pharmaceutical Industries Ltd.) and served as the Vice President, Research of the publicly held biotechnology firm from its inception until 1995. Dr. Gruber was also the founder of two additional public
companies: Aramed, Inc., a central nervous system drug discovery company, and Viagene, Inc., a gene therapy company, which was acquired by Chiron Corporation. After completing his training in Internal Medicine, Rheumatology and Biochemical
Genetics, Dr. Gruber served on the faculty at the University of California, San Diego from 1977 until 1986. Dr. Gruber previously served as a member of the Board of Overseers of the School of Arts and Sciences of the University of
Pennsylvania and as a member of the University of Pennsylvania Medical School Medical Alumni Leadership Council. He also previously served on the UCSD Foundation Board of Directors, where he headed the development committee. He is the author of over
100 original scientific articles and an inventor of 34 issued and numerous pending patents. Dr. Gruber holds a B.A. and an M.D. from the University of Pennsylvania.

Hector Garcia-Molina, Ph.D., 54, joined Kintera as a member of our Technical Advisory Board and has served as a director since September 2003. Dr. Garcia-Molina has been the Leonard Bosack and Sandra
Lerner Professor in the Departments of Computer Science and Electrical Engineering at Stanford University since October 1995 and has served as chairman of the Department of Computer Science from January 2001 to December 2004. He has been a professor
at Stanford University since January 1992. From August 1994 until December 1997, he was the director of the Computer Systems Laboratory at Stanford University. Dr. Garcia-Molina also serves on the board of directors of Oracle Corporation.
Dr. Garcia-Molina holds a B.S. in Electrical Engineering from the Instituto Tecnologico de Monterrey, Mexico, and received his M.S. in Electrical Engineering and Ph.D. in Computer Science from Stanford University.

Executive Officers

Richard
LaBarbera, 59, has served as a director and as our president and chief executive officer since February 2007. Mr. LaBarbera joined Kintera as our chief operating officer in February 2006. For additional information regarding
Mr. LaBarbera, see above under Class III Directors (term expires 2009).



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Richard Davidson,44, has served as our chief financial officer since 2005. Prior to joining
Kintera, Mr. Davidson was chief financial officer of inCode Telecom Group, Inc., a provider of professional and engineering services for the wireless industry from 2001 to 2005. Prior to joining inCode, he was chief financial officer of
IBMs $2.5 billion Consumer Division. Prior to that appointment, Mr. Davidsons IBM career included director, brand finance for the $15 billion IBM Personal Systems Group, where he was responsible for financial management,
development, pricing, channel strategy and supply planning for IBM products. Mr. Davidson holds a B.A. in Economics from the University of California, Los Angeles and an M.B.A. in Finance from Carnegie Mellon University, Pennsylvania.

Alexander A. Fitzpatrick, 41, has served as our general counsel since 2004 and as our senior vice president and general counsel
since 2005. Mr. Fitzpatrick was appointed as our secretary in May 2007. Prior to joining Kintera, Mr. Fitzpatrick worked with the strategic transactions division of Vivendi Universal Net USA Group, Inc., the U.S. group of software and
internet companies owned by Vivendi Universal S.A., a French entertainment and telecommunications conglomerate, with primary responsibility for mergers and acquisitions. Prior to that position, Mr. Fitzpatrick was a member of the business and
corporate departments of the law firms Latham & Watkins LLP and Cooley Godward LLP in San Diego and Rogers & Wells LLP in London, England. Mr. Fitzpatrick holds a B.S. in Mathematics from Georgetown University and
his J.D. from the University of California, Berkeley Boalt Hall School of Law.

Scott Crowder, 45, has served as our chief
technology officer since 2007. Prior to joining Kintera, Mr. Crowder served as chief operating officer of Entriq Corporations Application Service Provider business unit from September 2003 to April 2007. Prior to that position,
Mr. Crowder worked for Inktomi Corporation, an internet software company focused on delivering scalable search and caching applications to major internet service providers, where he served as vice president of product operations from September
2000 to August 2002. Prior to Inktomi, Mr. Crowder served as senior vice president of technology services for Akamai/Intervu, from June 1998 to June 2000. From May 1985 to June 1998, Mr. Crowder served as director of advanced product
support of Sprint Corporation, a telecommunications company. Prior to Sprint Corporation, Mr. Crowder served in the United States Air Force from February 1981 to May of 1985. Mr. Crowder led a team focused on providing telecommunications
services for the 5th Combat Communications Group.

Audit Committee

The members of our audit committee are Alfred R. Berkeley III, Philip Heasley and Robert J. Korzeniewski, C.P.A. The audit committee oversees reviews and evaluates our financial statements, accounting and financial
reporting processes, internal control functions and the audits of our financial statements. The audit committee is also responsible for the appointment, compensation, retention and oversight of our independent auditors. Our board of directors has
determined that (i) Mr. Korzeniewski is an audit committee financial expert, as defined in the rules of the Securities and Exchange Commission (SEC), and (ii) all members of the audit committee are independent as
independence is defined in Rule 4200(a)(15) of the applicable NASDAQ listing standards. The audit committee acts pursuant to a written charter.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934
requires our executive officers, directors and persons who beneficially own more than 10% of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulations to
furnish us with copies of all Section 16(a) forms filed by such person.

Based solely on our review of such forms furnished to us and
written representations from such reporting persons, we believe that all filing requirements applicable to our executive officers, directors and more than 10% stockholders in 2007 were complied with.



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Code of Ethics

Our board of directors has adopted a Code of Ethics that applies to all of our employees, officers and directors. The Code of Ethics is available at our website at www.kintera.com. Once on our home page, click on
About Us, then Investor Relations, Corporate Governance and Code of Ethics for Employees and Directors. The policy is on this web page.

Item 11. Executive Compensation

Summary Compensation Table

The following table summarizes the compensation paid to or earned by our Chief Executive Officers and our other two most highly compensated executive
officers for years ended December 31, 2007 and 2006.



|                               |  |      |  |            |  |           |  |                |  |                     |  |                          |     |  |          
|------------------------------ |  | ---- |  | ---------- |  | --------- |  | -------------- |  | ------------------- |  | ------------------------ | --- |  | ---------
|Name and Principal Position    |  | Year |  | Salary ($) |  | Bonus ($) |  | StockAwards($) |  | OptionAwards (1)($) |  | All OtherCompensation($) |     |  | Total ($)
|Richard LaBarbera              |  | 2007 |  | 323,750    |  |          |  |               |  | 389,217             |  | 18,935                   | (2) |  | 731,902  
|Chief Executive Officer        |  | 2006 |  | 264,808    |  |          |  |               |  | 291,682             |  | 29,566                   | (3) |  | 586,056  
|                               |  |      |  |            |  |           | 
|Richard Davidson               |  | 2007 |  | 250,000    |  |          |  |               |  | 174,159             |  |                         |     |  | 424,159  
|Chief Financial Officer        |  | 2006 |  | 200,769    |  |          |  |               |  | 239,212             |  |                         |     |  | 439,981  
|                               |  |      |  |            |  |           | 
|Harry E. Gruber, M.D.          |  | 2007 |  | 38,268     |  |          |  |               |  | 191,710             |  | 238,385                  | (4) |  | 468,363  
|Former Chief Executive Officer |  | 2006 |  | 150,576    |  |          |  |               |  | 310,540             |  |                         |     |  | 461,116  
|                               |  |      |  |            |  |           | 
|Alexander A. Fitzpatrick       |  | 2007 |  | 219,092    |  |          |  |               |  | 79,119              |  |                         |     |  | 298,211  
|General Counsel                |  | 2006 |  | 195,000    |  | 60,000    |  |               |  | 81,516              |  |                         |     |  | 336,516  



|(1) | Represents the dollar amount recognized for financial statement purposes with respect to fiscal 2006 or 2007, as applicable, for the fair value of stock options granted in prior
fiscal years, in accordance with SFAS 123(R).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. LaBarbera received $18,935 in the form of a housing allowance.
|--- | ------------------------------------------------------------------

|(3) | Mr. LaBarbera received approximately $14,907 in executive relocation benefits and $14,685 in the form of a housing allowance.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(4) | Dr. Gruber received approximately $209,718 in severance benefits when he resigned as Chief Executive Officer in March 2007, plus an additional $18,667 in board fees, and
$10,000 in reimbursement of legal fees.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Outstanding Equity Awards at December 31, 2007

The following table sets forth for the number of securities underlying outstanding option awards under our equity compensation plans for each named
executive officer as of December 31, 2007. There are no outstanding shares of restricted stock held by our named executive officers as of December 31, 2007.



|                         |             |                                                    |               |                                                    |     |  |                        |  |                     
|------------------------ | ----------- | -------------------------------------------------- | ------------- | -------------------------------------------------- | --- |  | ---------------------- |  | --------------------
|                         |             | Option Awards                                     
|Name                     |             | Number ofSecuritiesUnderlyingUnexercisedOptions(#) |               | Number ofSecuritiesUnderlyingUnexercisedOptions(#) |     |  | OptionExercisePrice($) |  | OptionExpirationDate
|                         | Exercisable |                                                    | Unexercisable |                                                    |     | 
|Richard LaBarbera        |             | 153,847                                            |               | 171,153                                            | (1) |  | 2.56                   |  | 2/13/2016           
|                         |             | 0                                                  |               | 500,000                                            | (3) |  | 1.70                   |  | 4/2/2017            
|Richard R. Davidson      |             | 131,979                                            |               | 68,021                                             | (2) |  | 3.24                   |  | 5/11/2015           
|                         |             | 54,425                                             |               | 45,575                                             | (2) |  | 2.57                   |  | 10/27/2015          
|                         |             | 0                                                  |               | 100,000                                            | (4) |  | 1.70                   |  | 4/2/2017            
|                         |             | 0                                                  |               | 50,000                                             | (1) |  | 1.80                   |  | 9/4/2017            
|Harry E. Gruber, M.D.    |             | 171,122                                            |               | 28,878                                             | (2) |  | 7.70                   |  | 7/28/2014           
|                         |             | 45,312                                             |               | 54,688                                             | (1) |  | 2.13                   |  | 3/9/2016            
|                         |             | 0                                                  |               | 50,000                                             | (1) |  | 2.23                   |  | 8/1/2017            
|Alexander A. Fitzpatrick |             | 64,187                                             |               | 0                                                  |     |  | 2.92                   |  | 4/12/2014           
|                         |             | 8,850                                              |               | 0                                                  |     |  | 2.92                   |  | 7/28/2014           
|                         |             | 6,803                                              |               | 5,697                                              | (2) |  | 2.57                   |  | 10/27/2015          
|                         |             | 30,565                                             |               | 19,435                                             | (2) |  | 2.57                   |  | 7/21/2015           
|                         |             | 12,129                                             |               | 4,021                                              | (2) |  | 2.24                   |  | 7/29/2014           
|                         |             | 64,447                                             |               | 21,366                                             | (2) |  | 2.24                   |  | 4/12/2014           
|                         |             | 0                                                  |               | 25,000                                             | (1) |  | 1.30                   |  | 2/1/2017            
|                         |             | 0                                                  |               | 50,000                                             | (1) |  | 2.23                   |  | 8/1/2017            



|(1) | The shares underlying this option vest over a four-year period; 25% of the options underlying the grant become exercisable on the first anniversary of the date of grant and the
remaining 75% of shares with respect to such grant vest monthly over the remaining three years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The shares underlying this option vest over a four-year period; 25% of the options underlying the grant become exercisable on the first anniversary of the date of grant and the
remaining 75% of shares with respect to such grant vest daily over the remaining three years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 250,000 shares are subject to time-based vesting over 4 years, 125,000 will vest in full if the Company meets the achievement of board-approved targets for the 2008 fiscal year, and
the remaining 125,000 will not vest because the vesting of these shares was to occur in full if the Company met the board-approved 2007 financial plan, which was not achieved.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 50,000 shares are subject to time-based vesting over 4 years, 25,000 will vest in full if the Company meets the achievement of board-approved targets for the 2008 fiscal year, and
the remaining 25,000 will not vest because the vesting of these shares was to occur in full if the Company met the board-approved 2007 financial plan, which was not achieved.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Employment Agreements

Executive Agreement with
Richard LaBarbera

On August 1, 2007, we entered into an Executive Employment Agreement with Richard LaBarbera, our President and
Chief Executive Officer, pursuant to which, among other things, Mr. LaBarbera will receive an annual base salary of $330,000 and will be eligible for an annual performance-based bonus of up to seventy percent of his base salary based on the
achievement of certain goals and objectives established by us. In addition,



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if Mr. LaBarbera is terminated without cause, he will be eligible to receive continued payment of his annual base salary and health care coverage, as in
effect on the date of such termination, for twelve months. If within the period two months prior to and two years following a change in control Mr. LaBarbera resigns for good reason or is terminated without cause, Mr. LaBarbera will be
eligible to receive (i) in a lump sum within fifteen business days after the date of termination, an amount equal to the sum of his base salary in effect at the time of termination and the maximum annual bonus for which he is eligible at the
time of termination, (ii) health care coverage as in effect on the date of termination for twelve months and (iii) immediately vesting of one hundred percent (100%) of all restricted stock, unvested stock options and other equity
based compensation awards held by him as of the date of such termination. In addition, subject to certain conditions set forth in the Executive Employment Agreement, Mr. LaBarbera will continue to be reimbursed for certain documented costs and
expenses incurred directly in connection with his maintenance of a residence in San Diego and, as applicable, certain relocation costs and expenses.

Compensation for Mr. LaBarbera is subject to normal periodic review by our compensation committee. Mr. LaBarberas current base salary, as approved by our board of directors, is $330,000, and he is
currently eligible to receive an annual bonus of up to 70% of his annual base salary. Mr. LaBarbera is eligible to participate in any and all plans providing general benefits to our employees, subject to the provisions, rules and regulations
applicable to each such plan.

Mr. LaBarberas offer letter also provided that he be granted an option to purchase 325,000 shares
of common stock under our 2003 Equity Incentive Plan. This option was granted on February 13, 2006, his initial date of employment, with an exercise price of $2.56 per share. The option vests over a four year period.

Executive Agreement with Richard Davidson

Pursuant to our offer letter to Mr. Davidson dated May 7, 2005, Mr. Davidson is entitled to receive an initial annual salary of $200,000 and is eligible for an annual performance bonus of up to 50% of his base salary, based
on financial and other performance criteria. Compensation for Mr. Davidson is subject to normal periodic review by our compensation committee. Mr. Davidsons current base salary, as approved by our board of directors, is $250,000, and
he is currently eligible to receive an annual bonus of up to 50% of his annual base salary. Mr. Davidson is eligible to participate in any and all plans providing general benefits to our employees, subject to the provisions, rules and
regulations applicable to each such plan.

In addition, pursuant to the terms of the offer letter, Mr. Davidson received options to
purchase 200,000 shares of our common stock under our 2003 Equity Incentive Plan. This option was granted on May 11, 2005, with an exercise price of $3.24 per share. Under the terms of the offer letter, options to purchase 50% of the unvested
shares underlying the stock option granted to him in connection with our offer of employment (options to purchase 58,988 shares of common stock as of December 31, 2006) will vest upon the consummation of a change of control (as that term is
defined in our 2003 Equity Incentive Plan).

Mr. Davidsons employment may be terminated at any time, with or without cause, by
Mr. Davidson or us.

Executive Employment Agreement with Alexander A. Fitzpatrick

On October 4, 2007, we entered into an Executive Employment Agreement with Alexander A. Fitzpatrick, our Senior Vice President, General Counsel and
Secretary. If Mr. Fitzpatrick is terminated without cause, he will be eligible to receive continued payment of his annual base salary and health care coverage, as in effect on the date of such termination, for six months. If within the period
two months prior to and two years following a change in control Mr. Fitzpatrick resigns for good reason or is terminated without cause, Mr. Fitzpatrick will be eligible to receive (i) in a lump sum within fifteen business days after
the date of termination, an amount equal to the sum of fifty percent of his base salary in effect at the time of termination and fifty percent of the maximum annual bonus for which he is eligible at the time of termination, (ii) health care
coverage as in effect on the date



47



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of termination for six months and (iii) immediately vesting of one hundred percent (100%) of all restricted stock, unvested stock options and other
equity based compensation awards held by him as of the date of such termination.

Director Compensation

The following table summarizes compensation that our directors (other than directors who are named executive officers) earned during 2007 for services as
members of our board of directors.



|                                |  |      |  |                               |  |                 |  |                  |  |                          |  |          
|------------------------------- |  | ---- |  | ----------------------------- |  | --------------- |  | ---------------- |  | ------------------------ |  | ---------
|Name                            |  | Year |  | Fees Earnedor Paid inCash ($) |  | StockAwards ($) |  | OptionAwards ($) |  | All OtherCompensation($) |  | Total ($)
|Alfred R. Berkeley III (1), (2) |  | 2007 |  |                              |  | 31,333          |  | 85,851           |  |                         |  | 117,184  
|Hector Garcia-Molina, Ph.D. (3) |  | 2007 |  | 20,667                        |  |                |  | 85,851           |  |                         |  | 106,518  
|Philip Heasley (2), (4)         |  | 2007 |  |                              |  | 22,667          |  | 85,851           |  |                         |  | 108,518  
|Robert Korzeniewski (5)         |  | 2007 |  |                              |  | 24,667          |  | 85,851           |  |                         |  | 110,518  
|Deborah Reiman, Ph.D. (6)       |  | 2007 |  |                              |  | 23,333          |  | 85,851           |  |                         |  | 109,184  
|Dennis Berman (7)               |  | 2007 |  | 6,708                         |  |                |  | 65,984           |  |                         |  | 72,692   
|Mitch Tuchman (8)               |  | 2007 |  | 30,624                        |  |                |  | 14,640           |  |                         |  | 45,264   



|(1) | Mr. Berkeley receives $10,000 as chairman of the board of directors and $3,000 as chairman of Nominating Committee in addition to his non-employee director fees. He had options
to purchase 150,000 shares of common stock outstanding as of December 31, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Members of the audit committee receive $3,000 in addition to their non-employee director fees.
|--- | ----------------------------------------------------------------------------------------------

|(3) | Dr. Garcia-Molina had options to purchase 160,000 shares of common stock outstanding as of December 31, 2007.
|--- | -------------------------------------------------------------------------------------------------------------

|(4) | Mr. Heasley had options to purchase 150,000 shares of common stock outstanding as of December 31, 2007.
|--- | -------------------------------------------------------------------------------------------------------

|(5) | Mr. Korzeniewski receives $6,000 as chairman of the audit committee in addition to his non-employee director fees. He had options to purchase 150,000 shares of common stock
outstanding as of December 31, 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Dr. Rieman receives $4,000 as chairman of the compensation committee in addition to her non-employee director fees. She had options to purchase 150,000 shares of common stock
outstanding as of December 31, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Mr. Berman served as a member of the board from his resignation until July 2007.
|--- | --------------------------------------------------------------------------------

|(8) | Mr. Tuchman was elected to the board of directors in May 2007. He had options to purchase 50,000 shares of common stock outstanding as of December 31, 2007.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Summary of Director Compensation

For our fiscal year ended December 31, 2006 and through May 2, 2007, each of our non-employee directors earned a stipend of $1,000 per month of service. On May 3, 2007, and in connection with a report on director compensation
by an independent consultant, our compensation committee proposed changes in our director compensation program that were adopted by our full board of directors that day. Commencing on May 3, 2007, our directors will be compensated on an annual
basis as follows:



| |  |  | Each of our non-employee directors will receive a base fee of $25,000.
| | - |  | ----------------------------------------------------------------------



| |  |  | The chairman of our board of directors, who is a non-employee director, will receive an additional fee of $10,000.
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | The chairman of our audit committee will receive an additional fee of $6,000, and the other members of our audit committee will receive $3,000.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The chairman of our compensation committee will receive an additional fee of $4,000.
| | - |  | ------------------------------------------------------------------------------------



| |  |  | The chairman of our nominating committee will receive an additional fee of $3,000.
| | - |  | ----------------------------------------------------------------------------------

Directors are reimbursed for reasonable expenses incurred with attending board of director and committee meetings.

Also on May 3, 2007, our board of directors approved a program whereby non-executive directors can choose to receive restricted stock in lieu of
cash compensation. The compensation committee adopted this plan in order to conserve cash that would otherwise be paid to such non-employee directors. Directors choosing to receive restricted stock instead of cash compensation will receive such
grants once per calendar year under the 2003 Equity Incentive Plan. Vesting of the restricted stock will occur monthly on a pro rata basis, with 1/12 of the grant vesting on the first of each month of continued service as a non-employee director.
Unvested restricted stock is subject to forfeiture in the event that the recipient terminates his or her service to the board. Beginning in 2008, such annual stock grants will be valued on the first trading day of each calendar year. Each
non-employee director was also given the opportunity to elect to receive earned but unpaid director fees for periods prior to May 3, 2007 in the form of fully vested shares of restricted stock to be issued under the 2003 Equity Incentive Plan.

Upon election to our board of directors, each of our non-employee directors is granted an initial option to purchase up to 50,000 shares
of our common stock at the then fair market value pursuant to the terms of our 2003 Equity Incentive Plan. In addition, each non-employee director is automatically granted an option to purchase up to 25,000 shares of our common stock if he or she
remains on the board of directors on the date of each annual meeting of stockholders (unless he or she joined our board of directors within six months of such meeting). Twenty-five percent (25%) of such grants vest one year after their date of
grant, and the remaining 75% are to vest in equal daily installments over a period of three years thereafter. Such vesting is conditioned on continued status as one of our directors. The options and unvested shares of restricted stock granted in
accordance with the preceding paragraph will become fully vested immediately prior to a change in control of the Company. Our directors are also eligible for discretionary option grants under the terms of our 2003 Equity Incentive Plan. Other than
as described above, our board of directors made no changes to our equity compensation grant practices for directors for the fiscal year ending December 31, 2007.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

Equity Compensation Plans Information

Information about our equity compensation plans at
December 31, 2007 is as follows:



|                                                          |  |                                                               |  |                                                   |      |                                                        |          
|--------------------------------------------------------- |  | ------------------------------------------------------------- |  | ------------------------------------------------- | ---- | ------------------------------------------------------ | ---------
|Plan Category                                             |  | Number ofShares to beIssued UponExercise ofOutstandingOptions |  | WeightedAverageExercise PriceofOutstandingOptions |      | Number ofSharesRemainingAvailable forFutureIssuance(b)
|Equity compensation plans approved by our stockholders(a) |  | 6,596,310                                                     |  | $                                                 | 2.52 |                                                        | 3,609,150



|(a) | Includes our 2003 Equity Incentive Plan, 2004 Incentive Plan (Fundware) and our 2003 Employee Stock Purchase Plan. However, no future grants may be made under our 2000 Stock Option
Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Includes 1,581,564 shares reserved for issuance under our 2003 Employee Stock Purchase Plan.
|--- | --------------------------------------------------------------------------------------------

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth
certain information concerning the beneficial ownership of the shares of our common stock as of February 29, 2008, by (i) each person we know to be the beneficial owner of 5% or more of



49



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the outstanding shares of our common stock, (ii) each executive officer listed in the Summary Compensation Table, (iii) each of our directors and
(iv) our current executive officers and directors as a group. The address for all named executive officers and directors is c/o Kintera, Inc., 9605 Scranton Road, Suite 200, San Diego, California 92121.

Except in cases in which community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the
table possesses sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by such stockholder.



|                                                                                         |  |                                    |      |  |                                            |  
|---------------------------------------------------------------------------------------- |  | ---------------------------------- | ---- |  | ------------------------------------------ | -
|Name or Group of Beneficial Owner                                                        |  | Number of SharesBeneficially Owned |      |  | Percentage of SharesBeneficially Owned (1) |  
|                                                                                         |  |                                   
|5% Stockholder:                                                                          |  |                                    |      |  |                                            |  
|Magnetar Capital Partners LLC (2) 1603 Orrington Avenue, 13thFloorEvanston, IL
60210     |  | 4,151,400                          |      |  | 10.3                                       | %
|                                                                                         |  |                                   
|Coghill Capital Management, LLC (3) One N. Wacker Dr., Suite 4350Chicago, IL 60606       |  | 4,114,281                          |      |  | 10.2                                       | %
|                                                                                         |  |                                   
|Diker Management, LLC (4) 745 Fifth Avenue, Suite 1409New York, NY 10151                 |  | 4,069,662                          |      |  | 10.1                                       | %
|                                                                                         |  |                                   
|Financial & Investment Management Group, Ltd. (5) 111 Cass StreetTraverse City, MI 49684 |  | 3,692,226                          |      |  | 9.1                                        | %
|                                                                                         |  |                                   
|Named Executive Officers:                                                                |  |                                    |      |  |                                            |  
|Richard R. Davidson (6)                                                                  |  | 248,539                            |      |  | *                                          |  
|Richard LaBarbera (7)                                                                    |  | 367,678                            |      |  | *                                          |  
|Alexander Fitzpatrick (8)                                                                |  | 216,142                            |      |  | *                                          |  
|Directors:                                                                               |  |                                    |      |  |                                            |  
|Harry E. Gruber, M.D. (9)                                                                |  | 3,872,025                          |      |  | 9.5                                        | %
|Hector Garcia-Molina, Ph.D. (10)                                                         |  | 111,095                            |      |  | *                                          |  
|Alfred R. Berkeley III (11)                                                              |  | 220,392                            |      |  | *                                          |  
|Deborah D. Rieman, Ph.D. (12)                                                            |  | 70,392                             |      |  | *                                          |  
|Robert J. Korzeniewski, C.P.A. (13)                                                      |  | 122,392                            |      |  | *                                          |  
|Philip Heasley (14)                                                                      |  | 140,392                            |      |  | *                                          |  
|Mitchell Tuchman (15)                                                                    |  | 0                                  |      |  | *                                          |  
|Executive officers and directors as a Group (10 persons):                                |  | 5,369,047                          | (16) |  | 12.8                                       | %



|* | Represents less than 1%
|- | -----------------------

|(1) | Applicable percentage ownership is based on 40,396,905 shares of our common stock outstanding as of February 29, 2008. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, based on factors including voting and investment power with respect to shares, subject to the applicable community property laws. Shares of our common stock subject to options or warrants currently
exercisable, or exercisable within 60 days after February 29, 2008, are deemed outstanding for the purpose of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the
percentage ownership of any other person.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based solely on information provided on a Schedule 13G/A filed by Magnetar Capital Partners LLC with the SEC on February 13, 2008. According the Schedule
13G/A, as of December 31, 2007, each of Magnetar Capital Partners, Supernova Management LLC and Alec N. Litowitz may be deemed to be the beneficial
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | owners of 4,151,400 shares, Magnetar Investment Management may be deemed to beneficially own 2,031,702 shares and Magnetar Financial may be deemed to
beneficially own 2,119,698 shares.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based solely on information provided on a Schedule 13G/A filed by Coghill Capital Management LLC with the SEC on February 14, 2008. Pursuant to the Schedule 13G/A, CCM Master
Qualified Fund, Ltd., Coghill Capital Management, L.L.C. and Clint D. Coghill are deemed to beneficially own and have shared voting and dispositive powers with respect to such shares. Mr. Coghill is the managing member of Coghill Capital
Management, L.L.C., an entity which serves as the investment manager of CCM Master Qualified Fund, Ltd.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Based solely on information provided on a Schedule 13G/A filed by Diker Management, L.L.C. with the SEC on February 12, 2008. Pursuant to the Schedule 13G/A, as the sole
general partner of the Diker Funds, Diker GP, LLP may be deemed to beneficially own and have shared voting and dispositive powers with respect to such shares. Diker Management, LLC serves as the investment manager of the Diker Funds. Accordingly,
Diker Management may be deemed the beneficial owner of shares held by the Diker Funds. Charles M. Diker and Mark N. Diker are the managing members of each of Diker GP and Diker Management, and in that capacity direct their operations.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Based on information provided on a Schedule 13G filed by Financial & Investment Management Group, Ltd. with the SEC on January 29, 2008. According to the Schedule 13G,
as of December 31, 2007, Financial & Investment Management Group, Ltd. is a registered investment advisor, managing individual client accounts. All shares represented on the Schedule 13G are held in accounts owned by the clients of
Financial & Investment Management Group, Ltd. Because of this, Financial & Investment Management Group, Ltd. disclaims beneficial ownership.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes options to purchase 248,539 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Mr. Davidson.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes options to purchase 367,678 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Mr. LaBarbera.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes options to purchase 216,142 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Mr. Fitzpatrick.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Based solely on information provided on a Schedule 13G filed by Harry E. Gruber, M.D. with the SEC on February 12, 2008. Includes options to purchase 240,959 shares of our
common stock exercisable within 60 days of February 29, 2008, held in the name of Dr. Gruber.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Includes options to purchase 111,095 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Dr. Garcia-Molina.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes options to purchase 101,095 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Mr. Berkeley.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Includes options to purchase 51,095 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Dr. Rieman.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Includes options to purchase 101,095 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Mr. Korzeniewski.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Includes options to purchase 101,095 shares of our common stock exercisable within 60 days of February 29, 2008, held in the name of Mr. Heasley.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Mr. Tuchman was appointed to our Board of Directors on May 18, 2007.
|---- | --------------------------------------------------------------------

|(16) | Current executive officers include Mr. LaBarbera, Mr. Davidson, Mr. Fitzpatrick and Mr. Crowder.
|---- | ------------------------------------------------------------------------------------------------

Item 13. Certain Relationships and Related Transactions

Related Person Transactions

None.

Procedures for Approval of Related Party
Transactions

Pursuant to the charter of our audit committee, all transactions between us and any of our directors, executive officers
or related parties are subject to review by our audit committee.



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Board Member Independence

As required by NASDAQ listing standards, a majority of the members of a listed companys board of directors must qualify as independent, as affirmatively determined by the listed companys board
of directors. Consistent with these considerations, our board of directors has determined that all of the members of the board of directors are independent as independence is defined in the applicable NASDAQ listing standards except for
Dr. Gruber and Mr. LaBarbera. Dr. Gruber is our former Chief Executive Officer, and Mr. LaBarbera is our Chief Executive Officer and President.

Item 14. Principal Accountant Fees and Services

Fees Paid to Ernst & Young LLP

The following table sets forth the aggregate fees billed to us for the fiscal years ended 2007 and 2006 by Ernst & Young LLP:



|                       |  |             |         |             |   |        
|---------------------- |  | ----------- | ------- | ----------- | - | -------
|                       |  | Fiscal 2007 |         | Fiscal 2006
|Audit Fees (1)         |  | $           | 958,599 |             | $ | 998,136
|Audit-Related Fees (2) |  | $           |        |             | $ | 23,093 
|Tax Fees               |  | $           |        |             | $ |       
|All Other Fees         |  | $           |        |             | $ | 24,243 



|(1) | Audit Fees consist of fees billed for professional services rendered for the audit of the Companys consolidated annual financial statements and review of the interim
consolidated financial statements included in quarterly reports.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Companys consolidated
financial statements and are not reported under Audit Fees. This category includes fees related to due diligence in connection with acquisitions, audits of acquired companies, and consultations not meeting the definition of audit fees.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Audit Committees policy is to pre-approve all audit and permissible non-audit services provided by our independent
auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of
services. The independent auditor and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with this pre-approval. The chairperson of the Audit
Committee is also authorized, pursuant to delegated authority, to pre-approve additional services of up to $35,000 per engagement on a case-by-case basis, and such approvals are communicated to the full Audit Committee at its next meeting. This
authority may be delegated to any other member of the Audit Committee as well.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this
report:



|    |  |                                                                          |  |           
|--- |  | ------------------------------------------------------------------------ |  | ----------
|    |  |                                                                          |  | PageNumber
|(a) |  | Financial Statements:                                                    |  |           
|    |  | (1)    Report of Independent Registered Public Accounting Firm           |  | F-1       
|    |  | Consolidated Balance Sheets at December 31, 2007 and 2006                |  | F-2       
|    |  | Consolidated Statements of Operations for Fiscal 2007 and 2006           |  | F-3       
|    |  | Consolidated Statements of Stockholders Equity for Fiscal 2007 and 2006 |  | F-4       
|    |  | Consolidated Statements of Cash Flows for Fiscal 2007 and 2006           |  | F-5       
|    |  | Notes to Consolidated Financial Statements                               |  | F-6       
|    |  |                                                                         
|    |  | (2)    Schedule IIValuation and Qualifying Accounts                     |  | S-1       



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Financial statement schedules other than those listed above have been omitted because they are either not
required, not applicable or the information is otherwise included.



|(b) | Exhibits:
|--- | ---------



|               |  |                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                           
|3.2(2)         |  | Amended and Restated Certificate of Incorporation of the Registrant                                                                               
|3.4(13)        |  | Amended and Restated Bylaws of the Registrant                                                                                                     
|3.5(11)        |  | Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock of Kintera, Inc.                                     
|4.1(4)         |  | Specimen Common Stock Certificate                                                                                                                 
|4.2(11)        |  | Rights Agreement, dated as of January 25, 2006, between the Registrant and U.S. Stock Transfer Corp.                                              
|10.1(1)#       |  | Form of Indemnity Agreement for directors and executive officers of the Registrant                                                                
|10.2(4)#       |  | 2000 Stock Option Plan and form of Option Agreement thereunder, as amended                                                                        
|10.3(9)#       |  | Amended and Restated 2003 Equity Incentive Plan and form of Option Agreement thereunder, as amended                                               
|10.4(2)#       |  | 2003 Employee Stock Purchase Plan and form of Subscription Agreement thereunder                                                                   
|10.6(2)        |  | San Diego Tech Center Office Building Lease dated as of August 7, 2000 by and between the Registrant and San Diego Tech Center, LLC, as amended   
|10.10(5)       |  | Form of Securities Purchase Agreement among the Company and the investors identified on the signature pages thereto, dated as of July 12, 2004    
|10.11(5)       |  | Form of Registration Rights Agreement by and among the Company and the investors identified on the signature pages thereto, dated July 12, 2004   
|10.12(7)       |  | Form of Securities Purchase Agreement among the Company and the investors identified on the signature pages thereto, dated as of November 29, 2004
|10.13(7)       |  | Form of Registration Rights Agreement among the Company and the investors identified on the signature pages thereto, dated as of November 29, 2004
|10.14(12)      |  | Sublease Agreement between Intuit, Inc. and American Fundware Holding Company, Inc., dated December 3, 2004                                       
|10.15(9)#      |  | Amended and Restated 2004 Equity Incentive Plan (Fundware) and related Form of Stock Option Agreement, as amended                                 
|10.16(10)      |  | Securities Purchase Agreement among the Company and the investors identified on the signature pages thereto, dated November 21, 2005              
|10.17(10)      |  | Registration Rights Agreement among the Company and the investors identified on the signature pages thereto, dated November 21, 2005              
|10.18(10)      |  | Form of Warrant issued to investor at the closing of the November 21, 2005 private placement                                                      
|10.19(15)      |  | Securities Purchase Agreement among the Company and the investors identified on the signature pages thereto, dated as of December 12, 2006        
|10.20(15)      |  | Registration Rights Agreements among the Company and the investors identified on the signature pages thereto, dated as of December 12, 2006       
|10.21(15)      |  | Warrant Amendment Agreement among the Company and the investors identified on the signature pages thereto, dated as of December 12, 2006          
|10.22(15)      |  | Form of Warrant issued by the Company to the investors at the closing of the December 12, 2006 private placement                                  



53



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|               |  |                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                          
|10.23(16)#     |  | Release of All Claims Agreement, dated May 17, 2007, by and between the Company and Harry E. Gruber              
|10.24(16)#     |  | Release of All Claims Agreement, dated May 18, 2007, by and between the Company and Dennis Berman                
|10.25(16)#     |  | Executive Employment Agreement, dated August 1, 2007, by and between the Company and Richard LaBarbera           
|10.26(14)#     |  | Change in Control and Severance Agreement between the Company and Alexander A. Fitzpatrick, dated October 4, 2007
|23.1           |  | Consent of Independent Registered Public Accounting Firm                                                         
|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               



|# | Indicates management contract or compensatory plan.
|- | ---------------------------------------------------

|(1) | Filed with initial Registration Statement on Form S-1 (File No. 333-109169) dated September 26, 2003.
|--- | -----------------------------------------------------------------------------------------------------

|(2) | Filed with Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-109169) dated November 4, 2003.
|--- | --------------------------------------------------------------------------------------------------------------

|(3) | Filed with Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-109169) dated November 28, 2003.
|--- | ---------------------------------------------------------------------------------------------------------------

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

|(5) | Filed on Current Report on Form 8-K on July 13, 2004.
|--- | -----------------------------------------------------

|(6) | Filed on Current Report on Form 8-K/A on November 3, 2004.
|--- | ----------------------------------------------------------

|(7) | Filed on Current Report on Form 8-K on November 30, 2004.
|--- | ---------------------------------------------------------

|(8) | Filed on Current Report on Form 8-K on December 9, 2004.
|--- | --------------------------------------------------------

|(9) | Filed with Registration Statement on Form S-8 (File No. 333-28927) dated October 11, 2005.
|--- | ------------------------------------------------------------------------------------------

|(10) | Filed on Current Report on Form 8-K on November 21, 2005.
|---- | ---------------------------------------------------------

|(11) | Filed on Current Report on Form 8-K on January 25, 2006.
|---- | --------------------------------------------------------

|(12) | Filed as Exhibit 10.13 to Annual Report on Form 10-K on March 16, 2005.
|---- | -----------------------------------------------------------------------

|(13) | Filed on Current Report on Form 8-K on November 5, 2007.
|---- | --------------------------------------------------------

|(14) | Filed as Exhibit 10.1 to Quarterly Report on Form 10-Q on November 7, 2007.
|---- | ---------------------------------------------------------------------------

|(15) | Filed on Current Report on Form 8-K on December 13, 2006.
|---- | ---------------------------------------------------------

|(16) | Filed as exhibit to Quarterly Report on Form 10-Q on August 9, 2007.
|---- | --------------------------------------------------------------------



54



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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 17, 2008



KINTERA, INC.By:

/s/    RICHARD LABARBERARichard LaBarberaChief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:



|                                                               |  |                                                                               |  |               
|-------------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | --------------
|Signature                                                      |  | Title                                                                         |  | Date          
|                                                               |  |                                                                              
|/S/    RICHARD
LABARBERA Richard LaBarbera                     |  | Chief Executive Officer, President and Director (Principal Executive Officer) |  | March 17, 2008
|                                                               |  |                                                                              
|/S/    RICHARD R.
DAVIDSON Richard R. Davidson                 |  | Chief Financial Officer (Principal Financial and Accounting Officer)          |  | March 17, 2008
|                                                               |  |                                                                              
|/S/    ALFRED R. BERKELEY
III Alfred R. Berkeley III           |  | Chairman of the Board                                                         |  | March 17, 2008
|                                                               |  |                                                                              
|/S/    HECTOR
GARCIA-MOLINA, PH.D. Hector Garcia-Molina,
Ph.D. |  | Director                                                                      |  | March 17, 2008
|                                                               |  |                                                                              
|/S/    DEBORAH D. RIEMAN,
PH.D. Deborah D. Rieman, Ph.D.       |  | Director                                                                      |  | March 17, 2008
|                                                               |  |                                                                              
|/S/    PHILIP
HEASLEY Philip Heasley                           |  | Director                                                                      |  | March 17, 2008
|                                                               |  |                                                                              
|/S/    MITCHELL
TUCHMAN Mitchell Tuchman                       |  | Director                                                                      |  | March 17, 2008



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and
Stockholders

Kintera, Inc.

We have audited the accompanying consolidated balance sheets of Kintera, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders equity, and cash flows for
each of the two years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Kintera, Inc. at December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2007,
in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

/s/ Ernst & Young LLP

San Diego, California

March 14, 2008



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##### Table of Contents

KINTERA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                              |  | December 31,2007 |          |   | December 31,2006 |  
|Assets                                                                                                                                                                        |  |                  |          |   |                  |   |          |  
|Current assets:                                                                                                                                                               |  |                  |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                                     |  | $                | 6,556    |   |                  | $ | 11,548   |  
|Marketable securities                                                                                                                                                         |  |                  | 2,848    |   |                  |   | 7,384    |  
|Restricted cash                                                                                                                                                               |  |                  | 12,429   |   |                  |   | 15,381   |  
|Accounts receivable, net of allowance for doubtful accounts of $320 and $915 at December 31, 2007 and December 31,
2006                                                       |  |                  | 4,174    |   |                  |   | 6,346    |  
|Prepaid expenses and other current assets                                                                                                                                     |  |                  | 1,024    |   |                  |   | 709      |  
|Deferred costs                                                                                                                                                                |  |                  | 1,123    |   |                  |   | 581      |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Total current assets                                                                                                                                                          |  |                  | 28,154   |   |                  |   | 41,949   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Property and equipment, net                                                                                                                                                   |  |                  | 4,173    |   |                  |   | 1,818    |  
|Software development costs, net                                                                                                                                               |  |                  | 1,686    |   |                  |   | 1,703    |  
|Other assets                                                                                                                                                                  |  |                  | 54       |   |                  |   | 83       |  
|Intangible assets, net                                                                                                                                                        |  |                  | 3,914    |   |                  |   | 7,651    |  
|Goodwill                                                                                                                                                                      |  |                  | 12,017   |   |                  |   | 12,017   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Total assets                                                                                                                                                                  |  | $                | 49,998   |   |                  | $ | 65,221   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|                                                                                                                                                                              |  |                 
|Liabilities and stockholders equity                                                                                                                                          |  |                  |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                                          |  |                  |          |   |                  |   |          |  
|Accounts payable, trade                                                                                                                                                       |  | $                | 1,881    |   |                  | $ | 2,349    |  
|Accrued expenses                                                                                                                                                              |  |                  | 820      |   |                  |   | 1,390    |  
|Accrued employee benefits and severance                                                                                                                                       |  |                  | 1,513    |   |                  |   | 2,242    |  
|Donations payable                                                                                                                                                             |  |                  | 12,429   |   |                  |   | 15,381   |  
|Short-term notes payable                                                                                                                                                      |  |                  | 1,021    |   |                  |   |         |  
|Deferred revenue                                                                                                                                                              |  |                  | 15,513   |   |                  |   | 17,748   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                                     |  |                  | 33,177   |   |                  |   | 39,110   |  
|Notes payable                                                                                                                                                                 |  |                  | 2,161    |   |                  |   |         |  
|Deferred rent and other                                                                                                                                                       |  |                  | 628      |   |                  |   | 509      |  
|Deferred tax liability                                                                                                                                                        |  |                  | 441      |   |                  |   |         |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Total liabilities                                                                                                                                                             |  |                  | 36,407   |   |                  |   | 39,619   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Commitments and contingencies                                                                                                                                                 |  |                  |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                                         |  |                  |          |   |                  |   |          |  
|Preferred stock, $0.001 par value; 20,000 shares authorized, no shares outstanding at December 31, 2007 and December 31,
2006                                                 |  |                  |         |   |                  |   |         |  
|Common stock, $0.001 par value, authorized 60,000 shares authorized, 40,397 and 40,098 shares issued and outstanding at December 31, 2007
and December 31, 2006, respectively |  |                  | 40       |   |                  |   | 40       |  
|Additional paid-in capital                                                                                                                                                    |  |                  | 157,426  |   |                  |   | 153,642  |  
|Accumulated other comprehensive income                                                                                                                                        |  |                  | 2        |   |                  |   | 12       |  
|Accumulated deficit                                                                                                                                                           |  |                  | (143,877 | ) |                  |   | (128,092 | )
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                    |  |                  | 13,591   |   |                  |   | 25,602   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                    |  | $                | 49,998   |   |                  | $ | 65,221   |  
|                                                                                                                                                                              |  |                  |          |   |                  |   |          |  

See accompanying Notes to Consolidated Financial Statements.



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##### Table of Contents

KINTERA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                           |  |                          |         |   |      |   |         |  
|------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                           |  | Years ended December 31, |        
|                                           |  | 2007                     |         |   | 2006 |  
|Net revenue                                |  | $                        | 44,935  |   |      | $ | 41,103  |  
|Cost of revenue                            |  |                          | 15,851  |   |      |   | 18,394  |  
|                                           |  |                          |         |   |      |   |         |  
|Gross profit                               |  |                          | 29,084  |   |      |   | 22,709  |  
|                                           |  |                          |         |   |      |   |         |  
|Operating expenses:                        |  |                          |         |   |      |   |         |  
|Sales and marketing                        |  |                          | 19,353  |   |      |   | 25,450  |  
|Product development and support            |  |                          | 6,338   |   |      |   | 9,340   |  
|General and administrative                 |  |                          | 14,910  |   |      |   | 18,918  |  
|Amortization of purchased intangibles      |  |                          | 2,451   |   |      |   | 2,996   |  
|Restructuring                              |  |                          | 2,274   |   |      |   |        |  
|                                           |  |                          |         |   |      |   |         |  
|Total operating expenses                   |  |                          | 45,326  |   |      |   | 56,704  |  
|                                           |  |                          |         |   |      |   |         |  
|Operating loss                             |  |                          | (16,242 | ) |      |   | (33,995 | )
|                                           |  |                          |         |   |      |   |         |  
|Interest income (expense) and other, net   |  |                          | 916     |   |      |   | 925     |  
|                                           |  |                          |         |   |      |   |         |  
|Loss before income taxes                   |  |                          | (15,326 | ) |      |   | (33,070 | )
|Provision for income taxes                 |  |                          | 459     |   |      |   | 53      |  
|                                           |  |                          |         |   |      |   |         |  
|Net loss                                   |  | $                        | (15,785 | ) |      | $ | (33,123 | )
|                                           |  |                          |         |   |      |   |         |  
|Loss per common sharebasic and diluted    |  | $                        | (0.39   | ) |      | $ | (0.93   | )
|                                           |  |                          |         |   |      |   |         |  
|Weighted average common shares outstanding |  |                          | 39,972  |   |      |   | 35,798  |  
|                                           |  |                          |         |   |      |   |         |  

See accompanying Notes to Consolidated Financial Statements.



F-3



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##### Table of Contents

KINTERA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(shares and dollars in thousands)



|                                                                                                  |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------------------------- |  | ------------ | - | ------------------------ | ------ | -- | -------------------- | - | ------- | --------------------------------- |  | - | ------------------ | - |  | ------------------------ | --- | - |  | - | -------- | - |  | - | ------- | -
|                                                                                                  |  | Common stock |   | Additionalpaid-incapital |        |    | Deferredcompensation |   |         | Accumulatedothercomprehensiveloss |  |   | Accumulateddeficit |   |  | Totalstockholdersequity |    
|                                                                                                  |  | Shares       |   |                          | Amount |    |                      |   |         |                                  
|Balance at January 1, 2006                                                                        |  | 36,252       |   |                          | $      | 36 |                      | $ | 147,824 |                                   |  | $ | (3,874             | ) |  | $                        | (77 | ) |  | $ | (94,969  | ) |  | $ | 48,940  |  
|Elimination of deferred compensation upon the adoption of SFAS123(R)                              |  |             |   |                          |        |   |                      |   | (3,874  | )                                 |  |   | 3,874              |   |  |                          |    |   |  |   |         |   |  |   |        |  
|Issuance of common stock, net of $525 in issuance costs                                           |  | 4,000        |   |                          |        | 4  |                      |   | 4,475   |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 4,479   |  
|Issuance of common stock under employee stock option and purchase plans                           |  | 254          |   |                          |        |   |                      |   | 269     |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 269     |  
|Stock-based compensation expense                                                                  |  |             |   |                          |        |   |                      |   | 4,498   |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 4,498   |  
|Stock-based compensation expense to consultants                                                   |  |             |   |                          |        |   |                      |   | 29      |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 29      |  
|Shares released from escrow in connection with contingent consideration in acquisition            |  |             |   |                          |        |   |                      |   | 314     |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 314     |  
|Issuance of common stock in connection with litigation settlement                                 |  | 72           |   |                          |        |   |                      |   | 107     |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 107     |  
|Cancellation of stock certificates in connection with extinguishment of acquisition contingencies |  | (480         | ) |                          |        |   |                      |   |        |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   |        |  
|Comprehensive loss:                                                                               |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   |         |  
|Net loss                                                                                          |  |             |   |                          |        |   |                      |   |        |                                   |  |   |                   |   |  |                          |    |   |  |   | (33,123  | ) |  |   | (33,123 | )
|Unrealized gain on marketable securities                                                          |  |             |   |                          |        |   |                      |   |        |                                   |  |   |                   |   |  |                          | 89  |   |  |   |         |   |  |   | 89      |  
|                                                                                                  |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   |         |  
|Comprehensive loss                                                                                |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   | (33,034 | )
|                                                                                                  |  |              |  
|Balance at December 31, 2006                                                                      |  | 40,098       |   |                          |        | 40 |                      |   | 153,642 |                                   |  |   |                   |   |  |                          | 12  |   |  |   | (128,092 | ) |  |   | 25,602  |  
|Issuance of common stock under employee stock option and purchase plans                           |  | 222          |   |                          |        |   |                      |   | 335     |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 335     |  
|Stock-based compensation expense                                                                  |  |             |   |                          |        |   |                      |   | 3,317   |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 3,317   |  
|Stock-based compensation expense for board fees paid in lieu of cash                              |  | 19           |   |                          |        |   |                      |   | 32      |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 32      |  
|Stock issued for board fees accrued during 2006                                                   |  | 58           |   |                          |        |   |                      |   | 100     |                                   |  |   |                   |   |  |                          |    |   |  |   |         |   |  |   | 100     |  
|Comprehensive loss:                                                                               |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   |         |  
|Net loss                                                                                          |  |             |   |                          |        |   |                      |   |        |                                   |  |   |                   |   |  |                          |    |   |  |   | (15,785  | ) |  |   | (15,785 | )
|Unrealized loss on marketable securities                                                          |  |             |   |                          |        |   |                      |   |        |                                   |  |   |                   |   |  |                          | (10 | ) |  |   |         |   |  |   | (10     | )
|                                                                                                  |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   |         |  
|Comprehensive loss                                                                                |  |              |   |                          |        |    |                      |   |         |                                   |  |   |                    |   |  |                          |     |   |  |   |          |   |  |   | (15,795 | )
|                                                                                                  |  |              |  
|Balance at December 31, 2007                                                                      |  | 40,397       |   |                          | $      | 40 |                      | $ | 157,426 |                                   |  | $ |                   |   |  | $                        | 2   |   |  | $ | (143,877 | ) |  | $ | 13,591  |  
|                                                                                                  |  |              |  

See accompanying Notes to Consolidated Financial Statements.



F-4



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##### Table of Contents

KINTERA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                      |  |                         |         |   |      |   |         |  
|------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                                                      |  | Years endedDecember 31, |        
|                                                                                      |  | 2007                    |         |   | 2006 |  
|OPERATING ACTIVITIES                                                                  |  |                         |         |   |      |   |         |  
|Net loss                                                                              |  | $                       | (15,785 | ) |      | $ | (33,123 | )
|Adjustments to reconcile loss to net cash used in operating activities:               |  |                         |         |   |      |   |         |  
|Bad debt expense                                                                      |  |                         | (465    | ) |      |   | (61     | )
|Depreciation                                                                          |  |                         | 1,356   |   |      |   | 1,948   |  
|Amortization of software development costs                                            |  |                         | 1,011   |   |      |   | 999     |  
|Amortization of intangible assets                                                     |  |                         | 2,451   |   |      |   | 2,996   |  
|Amortization of premium (accretion of discount) on securities                         |  |                         | (24     | ) |      |   | 25      |  
|Forgiveness of employee notes                                                         |  |                         | 24      |   |      |   | 83      |  
|Deferred income taxes                                                                 |  |                         | 441     |   |      |   |        |  
|Non-cash restructuring charges                                                        |  |                         | 1,107   |   |      |   |        |  
|Impairment of software development costs                                              |  |                         | 18      |   |      |   | 577     |  
|Stock-based compensation                                                              |  |                         | 3,349   |   |      |   | 4,527   |  
|Common stock issued as litigation settlement                                          |  |                         |        |   |      |   | 107     |  
|Loss on disposal of property and equipment                                            |  |                         | 213     |   |      |   | 19      |  
|Changes in assets and liabilities:                                                    |  |                         |         |   |      |   |         |  
|Accounts receivable                                                                   |  |                         | 2,611   |   |      |   | (301    | )
|Prepaid expenses and other current assets                                             |  |                         | 363     |   |      |   | 1,474   |  
|Deferred costs                                                                        |  |                         | (542    | ) |      |   | (581    | )
|Accounts payable and accrued expenses                                                 |  |                         | (938    | ) |      |   | 734     |  
|Accrued employee benefits and severance                                               |  |                         | (729    | ) |      |   | (168    | )
|Donations payable to customers                                                        |  |                         | (2,952  | ) |      |   | 4,093   |  
|Restricted cash                                                                       |  |                         | 2,952   |   |      |   | (4,093  | )
|Deferred revenue                                                                      |  |                         | (1,973  | ) |      |   | 5,833   |  
|Deferred rent                                                                         |  |                         | 119     |   |      |   | 398     |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Cash used in operating activities                                                     |  |                         | (7,393  | ) |      |   | (14,514 | )
|                                                                                      |  |                         |         |   |      |   |         |  
|INVESTING ACTIVITIES                                                                  |  |                         |         |   |      |   |         |  
|Purchases of marketable securities                                                    |  |                         | (10,616 | ) |      |   | (5,995  | )
|Sales and maturities of marketable securities                                         |  |                         | 15,166  |   |      |   | 20,544  |  
|Purchases of property and equipment                                                   |  |                         | (914    | ) |      |   | (280    | )
|Additions to software development costs                                               |  |                         | (1,015  | ) |      |   | (861    | )
|Other assets                                                                          |  |                         | 29      |   |      |   | 162     |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Cash provided by investing activities                                                 |  |                         | 2,650   |   |      |   | 13,570  |  
|                                                                                      |  |                         |         |   |      |   |         |  
|FINANCING ACTIVITIES                                                                  |  |                         |         |   |      |   |         |  
|Payments under financing arrangement and capital lease                                |  |                         | (584    | ) |      |   | (580    | )
|Proceeds from sale of common stock                                                    |  |                         |        |   |      |   | 4,479   |  
|Proceeds from issuance of common stock under employee stock option and purchase plans |  |                         | 335     |   |      |   | 269     |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Cash (used in) provided by financing activities                                       |  |                         | (249    | ) |      |   | 4,168   |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                             |  |                         | (4,992  | ) |      |   | 3,224   |  
|Cash and cash equivalents, beginning of year                                          |  |                         | 11,548  |   |      |   | 8,324   |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Cash and cash equivalents, end of year                                                |  | $                       | 6,556   |   |      | $ | 11,548  |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Supplemental disclosure of cash flow information:                                     |  |                         |         |   |      |   |         |  
|Cash paid for taxes                                                                   |  | $                       | 18      |   |      | $ | 53      |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Cash paid for interest                                                                |  | $                       | 62      |   |      | $ | 19      |  
|                                                                                      |  |                         |         |   |      |   |         |  
|Supplemental disclosure for non-cash investing and financing activities:              |  |                         |         |   |      |   |         |  
|Value of shares released from escrow in connection with contingent consideration      |  | $                       |        |   |      | $ | 314     |  
|Unrealized gain (loss) on investments                                                 |  | $                       | (10     | ) |      | $ | 89      |  
|Purchase of equipment under note payable                                              |  | $                       | 3,064   |   |      | $ |        |  

See accompanying Notes to Consolidated Financial Statements.



F-5



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per 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 and
services that enable nonprofit organizations to use the Internet to increase donations, reduce fundraising costs, manage complex finances for nonprofit organizations and governments 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 consolidated financial statements include the accounts of the Company and have been prepared in accordance with U.S. generally accepted
accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated in consolidation.

2008 Basis
of Presentation

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a
going concern. This basis of accounting contemplates the recovery of the Companys assets and the satisfaction of its liabilities in the normal course of business. Through December 31, 2007, the Company has an accumulated deficit of $143.9
million. The Companys long term operating success will depend on its ability to introduce and market enhancements to its existing products and services in a timely manner, which meet customer requirements and to respond to competitive
pressures and technological advances. In order for the Company to achieve positive operating results and positive cash flows, it will need to increase in the level of revenues or reduce operating costs. If events or circumstances occur such that the
Company does not meet its operating plan as expected, the Company may be required to reduce certain discretionary spending, which could have a material adverse effect on its ability to achieve its intended business objectives.

Use of Estimates

The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses in the financial statements and accompanying notes. Estimates are used for,
but not limited to, receivable valuations, depreciable lives of fixed assets and internally developed software, valuation of goodwill and acquired intangibles, stock-based compensation, accruals and contingencies. Actual results could differ
materially from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Restricted Cash

Restricted cash consists of donations collected by the Company and payable to
its customers, net of the associated transaction fees earned. The Company segregates monies associated with donations payable in a separate bank account with such monies used exclusively for the payment of donations payable. This usage restriction
is internally imposed and reflects the Companys intention with regard to such deposits.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Concentration of Credit Risk and Significant Customers

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term
investments and accounts receivable. The Company limits its exposure to credit loss by placing its cash and cash equivalents and investments with high credit quality financial institutions. In general, the Company does not require collateral on its
arrangements with customers. The Company has accounts receivable related to upfront and monthly maintenance fees as well as service and licensing fees which typically provide for credit terms of 30-60 days. The Company provides reserves against
accounts receivable for estimated losses that may result from customers inability to pay. The amount of the reserves are determined by analyzing known uncollectible accounts, aged receivables, economic conditions in the customers
industry, historical losses and changes in customer creditworthiness.

No customers generated greater than 10% of total net revenue in 2007
or 2006. No customers balance amounted to greater than 5% of accounts receivable as of December 31, 2007.

Fair Value of Financial
Investments

The carrying amounts shown for the Companys cash and cash equivalents, marketable securities, accounts
receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, accrued employee benefits and donations payable approximate their fair value due to the short-term maturities of these instruments.

Property and Equipment

Property and equipment
is stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets ranging from three to five years. Leasehold improvements are amortized using the straight-line method over the shorter of the
estimated useful lives of the assets or the terms of the related lease.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment of Disposable Long-Lived
Assets, the Company will record impairment losses on long-lived assets used in operations when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less
than the carrying amount of those assets. The Company recorded impairment losses of $18 and $577 on software development costs, in the years ended December 31, 2007 and December 31, 2006, and recorded asset impairment losses of $1,340
related to restructuring.

Impairment of Goodwill

Goodwill is evaluated for potential impairment annually, during the fourth quarter, by comparing the fair value of a reporting unit to its carrying value, including recorded goodwill. If the carrying value exceeds the
fair value, impairment is measured by comparing the derived fair value of goodwill to its carrying value, and any impairment determined would be recorded in the current period. To date there has been no impairment of the Companys recorded
goodwill.

Revenue Recognition

The Company derives revenue from fees paid by nonprofit organizations related to the use of Kintera Sphere as well as from the Companys service offerings for wealth profiling and screening, advocacy campaigns



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



and directed giving, from licenses of the Companys prepackaged accounting software and from multiple element arrangements that may include any
combination of these items. Revenue derived from the Companys software as a service is recognized in accordance with the provisions of SEC Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, and Emerging
Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Under SAB No. 104, revenue is recognized 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). Under EITF Issue No. 00-21, revenue is recognized when all of the following criteria are met: (1) the delivered
element(s) has value to the customer on a standalone basis; (2) there is objective and reliable evidence of fair value of the undelivered element(s); and (3) if the arrangement includes a general right of return relative to the delivered
element(s). Billings made or payments received in advance of providing services are deferred until the period these services are provided. If at the outset of an arrangement it is determined that the arrangement fee is not fixed or determinable,
revenue is deferred until the arrangement fee becomes due. If at the outset of an arrangement it is determined that collectibility is not probable, revenue is deferred until the receipt of payment.

For arrangements with multiple elements, revenue recognition is based on the individual units of accounting determined to exist in the arrangement. A
delivered item(s) is considered a separate unit of accounting when the delivered item(s) has value to the customer on a stand-alone basis, there is objective and reliable evidence of the fair value of the undelivered item(s) and, if the arrangement
includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the Companys control. Items are considered to have stand-alone value when they
are sold separately by any vendor or the customer could resell the item on a stand-alone basis. Fair value of an item is generally the price charged for the product when regularly sold on a stand-alone basis. When objective and reliable evidence of
fair value exists for all units of accounting in an arrangement, arrangement consideration is generally allocated to each unit of accounting based upon their relative fair values. In those instances when objective and reliable evidence of fair value
exists for the undelivered item(s) but not for the delivered items, the residual method is used to allocate arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered item(s) equals the
total arrangement consideration less the aggregate fair value of the undelivered item(s). When the Company is unable to establish stand-alone value for delivered item(s) or when fair value of an undelivered item(s) has not been established, as
generally is the case for the upfront payments for activation, implementation, maintenance, and use of Kintera Sphere, a single unit of accounting is deemed to exist and revenue is generally recognized on a straight-line basis over the entire term
of the arrangement. When contingent payments are received for the elements the Company recognizes these payments over the remaining term of the arrangement. Costs relating to activation and implementation are capitalized and expensed over the
remaining term of the arrangement.

The Companys arrangements that contain multiple elements have been contracts that include upfront
payments for a combination of the following: activation fees, data screening arrangements, implementation, periodic fees for the Companys software service plan, maintenance and support, professional services and transaction fees tied to the
donations and purchases that are processed. Revenue associated with agreements that are predominately service plan, maintenance and support is deferred and recognized on a straight-line basis over the greater of the contract term or estimated
customer life, which in general ranges from twelve to thirty-six



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



months. Revenue associated with agreements that are not predominately service plan, maintenance and support, which may include implementation services, is
deferred until the final element is delivered and recognized on a straight-line basis over the greater of the remaining contract life or remaining estimated customer life. Revenue related to 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 revenue in accordance with EITF Issue 99-19. Reporting Revenue Gross as a Principal verses
Net as an Agent.

Revenue from software licenses and related installation, training and consulting services is recognized in
accordance with the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2, Software Revenue Recognition, as modified by SOP 98-4. License revenue is generally recognized up-front upon delivery
of the licensed software, with arrangement consideration allocated to the license element using the residual method. This methodology is used when there is vendor-specific objective evidence (VSOE) of fair value for the remaining
deliverables and when the remaining services to be provided do not involve the significant production, modification or customization of the licensed software. If VSOE of one or more undelivered elements does not exist, the revenue is deferred and
recognized when delivery of the final element occurs or when fair value can be established. Revenue from postcontract customer support services is recognized separately on a straight-line basis over the term of the support period. VSOE for
postcontract customer support services is based on customer renewal rates. Revenue from installation, training and consulting services is generally recognized separately as the services are performed. VSOE for installation, training and consulting
services is based on the normal pricing practices for those services when regularly sold on a stand-alone basis. In order for the installation, training and consulting services to be accounted for separately, sufficient VSOE must exist to permit
allocation to the various elements of the arrangement, the services must not be essential to the functionality of any other element of the transaction and the services must be described in the contract such that the total price of the arrangement
would be expected to vary as a result of the inclusion or exclusion of the services. For arrangements with services that are essential to the functionality of the software but do not involve the significant production, modification or customization
of the licensed software, the license and related service revenue are recognized upon the latter of the delivery of the license and the completion of the services, with the residual method utilized for the remaining elements in the contract.

In accordance with EITF Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the
Vendors Product, the Company accounts for cash consideration (such as sales incentives) that is given to customers or resellers as a reduction of revenue rather than as an operating expense unless the Company receives a benefit that can be
identified and for which the fair value can be reasonably estimated.

Internal Use Software

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(SOP 98-1). 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 cost of revenue in the accompanying consolidated statements of operations. The Company reviews the software that has
been capitalized for impairment on an annual basis, or more frequently when events or changes in circumstances indicate the software might be impaired. Impairment losses are included in operating expenses in the accompanying consolidated statements
of operations.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



The following table summarizes the total amount of software costs capitalized and impaired for
internal use software during the years ended December 31, 2007 and 2006.



|                                 |  |                         |     |      |   |    
|-------------------------------- |  | ----------------------- | --- | ---- | - | ---
|                                 |  | Years endedDecember 31,
|                                 |  | 2007                    |     | 2006
|Internal Use Software  SOP 98-1 |  |                         |     |      |   |    
|Capitalized costs                |  | $                       | 729 |      | $ | 861
|Impairment losses                |  | $                       | 18  |      | $ | 577

Marketed Software

The Company accounts for the development cost of software that is marketed to customers in accordance with SFAS No. 86, Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed
(SFAS 86). All costs incurred prior to the resolution of unproven functionality and features, including new technologies, are expensed as research and development. After the uncertainties have been tested and the development issues have
been resolved and technological feasibility is achieved, subsequent direct costs such as coding, debugging and testing are capitalized. Capitalized costs of software to be sold, licensed or otherwise marketed 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 cost of revenue in the accompanying consolidated statements of operations. The Company reviews the software that has been capitalized for
impairment on an annual basis, or more frequently when events or changes in circumstances indicate that software might be impaired. Impairment losses are included in operating expenses in the accompanying consolidated statements of operations.

The following table summarizes the total amount of software costs capitalized and impaired for marketed software during the years ended
December 31, 2007 and 2006.



|                            |  |                         |     |      |   |  
|--------------------------- |  | ----------------------- | --- | ---- | - | -
|                            |  | Years endedDecember 31,
|                            |  | 2007                    |     | 2006
|Marketed Software  SFAS 86 |  |                         |     |      |   |  
|Capitalized costs           |  | $                       | 286 |      | $ | 

Advertising Costs

All advertising costs are expensed when incurred. Advertising costs were $226 and $1,083 for the years ended December 31, 2007 and 2006,
respectively.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123, Share-Based Payment (revised 2004) (SFAS 123(R)) and related interpretations which superseded APB No. 25. SFAS 123(R) requires that all
stock-based compensation be recognized as an expense in the financial statements and that such cost be measured at the fair value of the award. This statement was adopted using the modified prospective method, which requires the Company to recognize
compensation expense on a prospective basis. Therefore, prior period financial statements have not been restated. Under this method, in addition to reflecting compensation expense for new share-based awards, expense is also recognized to reflect the
remaining service period of awards that had been included in pro-forma disclosures in prior periods.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Income Taxes

On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income TaxesAn Interpretation of FASB Statement No. 109 (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with FASB Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes and
prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax
return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being
sustained.

At December 31, 2007, the Company had total deferred tax assets of $49,939. The deferred tax assets consist primarily of
federal and state tax net operating loss (NOL) carryforwards. Due to uncertainties surrounding the Companys ability to generate future taxable income to realize these assets, a full valuation has been established to offset the
deferred tax assets. Additionally, the future utilization of the NOL carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that may have occurred previously or that could
occur in the future.

The Company has not yet completed an analysis of its ability to utilize its research and development credit
carryforwards. Until this analysis has been completed, the Company has removed the deferred tax assets related to its research and development credit carryforwards of $4.1 million generated through 2007 from its deferred tax asset schedule and has
recorded a corresponding decrease to its valuation allowance. As a result, the Company has no unrecognized tax benefits as of December 31, 2007. When the analysis of the research and development tax credits is finalized, the Company will update
its deferred tax asset schedule and its analysis of unrecognized tax benefits under FIN 48. However, at this time, the Company cannot estimate how much the unrecognized tax benefits may change. Due to the existence of the valuation allowance, future
changes in the Companys unrecognized tax benefits will not impact the Companys effective tax rate.

The Companys practice
is to recognize interest and/or penalties accrued on any unrecognized tax benefits as a component of income tax expense. Upon adoption of FIN 48 on January 1, 2007, the Company did not have any interest or penalties associated with
unrecognized tax benefits, nor was any interest or penalties recognized during the 12 months ended December 31, 2007.

The Company is
subject to taxation in the U.S. federal jurisdiction and various state jurisdictions. The Companys tax years for 2000 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net
operating losses and research and development credits.

Deferred income taxes result primarily from temporary differences between financial
and tax reporting. Deferred tax assets and liabilities are determined based on the difference between the financial statement basis and the tax basis of assets and liabilities using enacted tax rates. Valuation allowances are established to reduce
deferred tax assets to the amount that is expected to more likely than not be realized in future tax returns.

Comprehensive 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 securities. Such amounts are excluded from net loss and are reported in accumulated other comprehensive loss in the accompanying consolidated balance sheets.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



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, Earnings Per Share, 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 in the periods presented.

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



|                                                                               |  |                          |            |   |      |   |            |  
|------------------------------------------------------------------------------ |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                               |  | Years ended December 31, |           
|                                                                               |  | 2007                     |            |   | 2006 |  
|Numerator                                                                      |  |                          |            |   |      |   |            |  
|Net loss                                                                       |  | $                        | (15,785    | ) |      | $ | (33,123    | )
|                                                                               |  |                          |            |   |      |   |            |  
|Denominator                                                                    |  |                          |            |   |      |   |            |  
|Basic and diluted                                                              |  |                          |            |   |      |   |            |  
|Weighted average common shares outstanding                                     |  |                          | 40,213,499 |   |      |   | 36,475,440 |  
|Less: weighted average shares held in escrow related to completed acquisitions |  |                          | (241,404   | ) |      |   | (677,009   | )
|                                                                               |  |                          |            |   |      |   |            |  
|Denominator in basic calculation                                               |  |                          | 39,972,095 |   |      |   | 35,798,431 |  
|                                                                               |  |                          |            |   |      |   |            |  
|Basic and diluted net loss per share                                           |  | $                        | (0.39      | ) |      | $ | (0.93      | )
|                                                                               |  |                          |            |   |      |   |            |  

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:



|                                   |  |              |  |          
|---------------------------------- |  | ------------ |  | ---------
|                                   |  | December 31,
|Common Stock Equivalents           |  | 2007         |  | 2006     
|Common stock subject to repurchase |  | 186,460      |  | 346,421  
|Options to purchase common stock   |  | 6,596,310    |  | 6,045,298
|Warrants to purchase common stock  |  | 3,020,000    |  | 3,020,000
|                                   |  |              |  |          
|                                   |  | 9,802,770    |  | 9,411,719
|                                   |  |              |  |          

Segment Information

In accordance with the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information,the Company is required to report financial and descriptive information about its
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.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Contingent Consideration

In connection with certain of the Companys acquisitions, if certain future internal performance goals are later satisfied, the aggregate consideration for the respective acquisition may be increased. Such
additional consideration, if earned, will be paid in the form of additional shares of the Companys common stock, which were reserved for that purpose. Any additional consideration paid will be allocated between goodwill and stock-based
compensation expense, as applicable. The measurement, recognition and allocation of contingent consideration are accounted for using the following principles:

Measurement and Recognition

In accordance with SFAS No. 141, Business Combinations,
which superseded APB Opinion No. 16, Business Combinations, 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. 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.

Amount Allocated to Goodwill

In accordance with Emerging Issue Task Force (EITF) No. 95-8, Accounting for Contingent Consideration Paid to the Shareholders of an
Acquired Enterprise in a Purchase Business Combination, the portion of additional consideration not affected by employment termination is recorded as additional purchase price, as the consideration is unrelated to continuing employment with the
Company. Such portion is allocated to goodwill. As of December 31, 2007 there are approximately 186,000 shares subject to contingent consideration provisions from previous acquisitions that may be issued. The Company recorded $0 and $313 in
additional contingent consideration in goodwill during years ended December 31, 2007 and 2006, respectively, relating to earnout provisions for prior acquisitions as follows:



|                                                       |  |                            |    
|------------------------------------------------------ |  | -------------------------- | ---
|Common Stock Equivalents                               |  | Year endedDecember 31,2006
|Prospect Information Network acquired in February 2004 |  | $                          | 124
|Giving Capital Network acquired in September 2004      |  |                            | 189
|                                                       |  |                            |    
|Total                                                  |  | $                          | 313
|                                                       |  |                            |    

Amount Allocated to Compensation Expense

In accordance with EITF 95-8, the 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 a charge to stock compensation expense because the consideration is related to continuing employment with the Company and will only be earned to the extent that the holder of such options
or restricted stock continues to be employed by the Company and meets the vesting requirements. The Company expenses the value over the remaining vesting period of the underlying restricted stock and unvested options. In the event that a holder does
not fully vest in the restricted stock or unvested options, expense is adjusted to reflect forfeitures.

On October 9, 2007, 56,000
shares subject to contingent consideration were released. The contingent consideration is measured based on revenues recognized in accordance with Generally Accepted Accounting



F-13



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Principles. Although the contingency was not fulfilled using the Companys current revenue recognition methodologies, during the third quarter of 2007
the Company concluded that if the contingency was applied using the historical licensed software methodologies of Prospect Information Network that these shares would have been released as defined by the contingent consideration agreement. In
connection with the release of these restricted shares to the Companys employees, the Company recorded stock-based compensation expense of $101 during the year ended December 31, 2007.

Restructuring Costs

The Company accounts for
restructuring costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires that costs associated with exit or disposal activities generally be recognized when they are incurred
rather than at the date of a commitment to an exit or disposal plan. The Company accounts for long-lived assets to be abandoned in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which
requires that a long-lived asset to be abandoned be considered held and used until disposed of, with a revision to the depreciable life in accordance with APB Opinion No. 20, Accounting Changes.

New Accounting Pronouncements Not Yet Adopted

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in accordance with generally
accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect
the adoption of SFAS No. 157 to have a material impact on the Companys consolidated financial statements. For non-financial assets and liabilities, the adoption of SFAS No. 157 has been deferred until January 1, 2009.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159
permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not
expect the adoption of SFAS No. 159 to have a material impact on the Companys consolidated financial statements.

In December
2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable
assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a
noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141
(R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company does is currently evaluating the potential impact, if any, of the
adoption of SFAS No. 141 (R) and SFAS No. 160 on the Companys consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation, as a result of internal corporate
restructuring and modifications to the way management runs the business. Amounts from



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



accrued expenses generally relating to employee bonuses in the amount of $386 were reclassified to accrued employee benefits. Amounts from operating expenses
generally related to data and support services revenue in the amount of $6,292 for the year ended December 31, 2006 were reclassified to cost of revenue.

The following table presents the impact of these reclassifications on the Companys previously reported condensed consolidated statements of operations for the twelve months ended December 31, 2006.



|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|------------------------------------------ |  | --------------------------- | ------- | - | ------- | - | ------ | -------------- |  | - | ------- | -
|                                           |  | Year endedDecember 31, 2006 |        
|                                           |  | AsReported                  |         |   | Reclass |   |        | AsReclassified | 
|Net revenues                               |  | $                           | 41,103  |   |         |   |        |                |  | $ | 41,103  |  
|Cost of Revenue                            |  |                             | 12,102  |   |         |   | 6,292  |                |  |   | 18,394  |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Gross profit                               |  |                             | 29,001  |   |         |   | (6,292 | )              |  |   | 22,709  |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Operating expenses:                        |  |                             |         |   |         |   |        |                |  |   |         |  
|Sales and marketing                        |  |                             | 25,183  |   |         |   | 267    |                |  |   | 25,450  |  
|Product development and support            |  |                             | 9,340   |   |         |   |        |                |  |   | 9,340   |  
|General and administrative                 |  |                             | 25,477  |   |         |   | (6,559 | )              |  |   | 18,918  |  
|Amortization of purchased intangibles      |  |                             | 2,996   |   |         |   |        |                |  |   | 2,996   |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Total operating expenses                   |  |                             | 62,996  |   |         |   | (6,292 | )              |  |   | 56,704  |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Operating loss                             |  |                             | (33,995 | ) |         |   |       |                |  |   | (33,995 | )
|Interest income (expense) and other, net   |  |                             | 925     |   |         |   |        |                |  |   | 925     |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Loss before income taxes                   |  |                             | (33,070 | ) |         |   |       |                |  |   | (33,070 | )
|Provision for income taxes                 |  |                             | 53      |   |         |   |        |                |  |   | 53      |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Net loss                                   |  | $                           | (33,123 | ) |         | $ |       |                |  | $ | (33,123 | )
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Loss per common sharebasic and diluted    |  | $                           | (0.93   | ) |         | $ |       |                |  | $ | (0.93   | )
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  
|Weighted average common shares outstanding |  |                             | 35,798  |   |         |   | 35,798 |                |  |   | 35,798  |  
|                                           |  |                             |         |   |         |   |        |                |  |   |         |  

2. Restructuring Program

In March 2007, the Company announced and began implementation of a restructuring program. The Companys Board of Directors approved managements plan, including the estimated amounts of the charges, on
March 28, 2007. The workforce reduction was implemented as a means to reduce ongoing operating expenses by restructuring the Companys operations and reducing its workforce. The restructuring program was completed as of June 30, 2007.
The restructuring program consisted of the elimination of 16% of the workforce, the restructuring of the Companys sales compensation plan, the elimination of certain lines of business and the abandonment of certain long-lived fixed assets. The
total amount incurred for termination benefits was $1,157, which included $553 payable to certain former executive officers as described below. The Company recorded $1,157 during the year ended December 31, 2007, for such termination benefits
which are included in restructuring charges in the condensed consolidated statement of operations.

In May 2007, the Company agreed to
the terms of severance arrangements for Dr. Harry E. Gruber, former Chief Executive Officer of the Company, who remained on the board of directors of the Company, and Dennis Berman, former Executive Vice President of the Company. At the
election of the former executives, these



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



severance liabilities may be settled in shares of common stock, notwithstanding the Companys failure to achieve certain operational performance
metrics. The severance arrangements with Dr. Gruber and Mr. Berman have a total cost of approximately $553.

In connection with
the restructuring program the Company identified certain intangible assets with a net carrying value of $1,439 as of December 31, 2006 which are associated with certain lines of business eliminated as of March 31, 2007. The impairment of
assets was recorded in the three months ended March 31, 2007 amounted to approximately $1,286 and is included in restructuring charges in the condensed consolidated statement of operations. These intangible assets were written-off as of
March 31, 2007.

In connection with the restructuring program the Company also identified certain fixed assets with a net carrying
value of $70 as of December 31, 2006 which were abandoned March 31, 2007. The impairment of these assets was recorded in the three months ended March 31, 2007 amounted to approximately $54 and is included in restructuring charges in
the condensed consolidated statement of operations. These fixed assets were written off as of March 31, 2007.

In connection with the
restructuring program the Company disposed of certain product lines during the year ended December 31, 2007, with such disposals resulting in a net gain of $223, which is included in restructuring charges in the condensed consolidated statement
of operations. The net gain was the result of the recognition of $262 of deferred revenue offset by $26 of receivables sold, $3 of capitalized software sold and net cash paid of $10.

The following table shows the activity related to the restructuring program for the year ended December 31, 2007:



|                               |  |                     |       |   |                  |   |        |       |  |   |       |   |  |   |        |  
|------------------------------ |  | ------------------- | ----- | - | ---------------- | - | ------ | ----- |  | - | ----- | - |  | - | ------ | -
|                               |  | TerminationBenefits |       |   | AssetImpairments |   |        | Other |  |   | Total |  
|Liability at December 31, 2006 |  | $                   |      |   |                  | $ |       |       |  | $ |      |   |  | $ |       |  
|Charged to expense             |  |                     | 1,157 |   |                  |   | 1,340  |       |  |   | (223  | ) |  |   | 2,274  |  
|Non-cash charges               |  |                     |      |   |                  |   | (1,340 | )     |  |   | 233   |   |  |   | (1,107 | )
|Cash payments                  |  |                     | (907  | ) |                  |   |       |       |  |   | (10   | ) |  |   | (917   | )
|                               |  |                     |       |   |                  |   |        |       |  |   |       |   |  |   |        |  
|Liability at December 31, 2007 |  | $                   | 250   |   |                  | $ |       |       |  | $ |      |   |  | $ | 250    |  
|                               |  |                     |       |   |                  |   |        |       |  |   |       |   |  |   |        |  

The liability at December 31, 2007 relates to termination benefits payable to certain former
executive officers with payment of cash thereof primarily contingent upon the achievement of certain operational performance metrics, as defined in the respective severance agreements, for two fiscal quarters. The first quarter of those operational
performance metrics was achieved during the three months ended September 30, 2007 and termination benefits of $210 were paid on November 30, 2007. Upon achievement of the second quarter of those operational performance metrics, an
additional $210 will be paid. At the election of the former executives, these amounts may be settled in shares of common stock, notwithstanding the Companys failure to achieve those operational performance metrics.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



3. Marketable Securities

The Company has classified all investments as available-for-sale, which are summarized as follows:



|                        |  |      |       |                      |   |                       |  |   |                 |   |  |   |      
|----------------------- |  | ---- | ----- | -------------------- | - | --------------------- |  | - | --------------- | - |  | - | -----
|December 31, 2007       |  | Cost |       | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairMarketValue
|Certificates of deposit |  | $    | 1,344 |                      | $ |                      |  | $ |                |   |  | $ | 1,344
|Auction rate security   |  |      | 1,000 |                      |   |                      |  |   |                |   |  |   | 1,000
|U.S. Government/Agency  |  |      | 502   |                      |   | 2                     |  |   |                |   |  |   | 504  
|                        |  |      |       |                      |   |                       |  |   |                 |   |  |   |      
|                        |  | $    | 2,846 |                      | $ | 2                     |  | $ |                |   |  | $ | 2,848
|                        |  |      |       |                      |   |                       |  |   |                 |   |  |   |      
|                        |  |      |       |                     
|December 31, 2006       |  | Cost |       | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairMarketValue
|Certificates of deposit |  | $    | 1,344 |                      | $ |                      |  | $ | (2              | ) |  | $ | 1,342
|Auction rate security   |  |      | 1,000 |                      |   |                      |  |   |                |   |  |   | 1,000
|Corporate Bonds         |  |      | 1,653 |                      |   | 1                     |  |   | (1              | ) |  |   | 1,653
|U.S. Government/Agency  |  |      | 3,375 |                      |   | 23                    |  |   | (9              | ) |  |   | 3,389
|                        |  |      |       |                      |   |                       |  |   |                 |   |  |   |      
|                        |  | $    | 7,372 |                      | $ | 24                    |  | $ | (12             | ) |  | $ | 7,384
|                        |  |      |       |                      |   |                       |  |   |                 |   |  |   |      

In February 2008, the auction failed for the $1 million auction rate security held by the Company.
The Company believes it will be able to liquidate the investment in auction rate security without significant loss within the next year, and we currently believe these securities are not significantly impaired as the underlying assets are generally
student loans which are substantially backed by the federal government. Accordingly these auction rate securities are classified as short-term investments on our balance sheet. The Company has reviewed all other investments as of December 31,
2007 for impairment and concluded that their carrying value approximated their fair value.

As of December 31, 2007, investments with
a remaining maturity of one year or less amounted to $1,752, investments with a remaining maturity of greater than one year and less than five years amounted to $96 and investments with a remaining maturity of greater than five years amounted to
$1,000. The Company realized a net gain $8 from the sale of securities in 2006. No gains or losses were realized from the sale of securities in 2007.

4. Balance Sheet Details

Accounts receivable consists of the following:



|                                      |  |              |       |   |      |   |       |  
|------------------------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                                      |  | December 31, |      
|                                      |  | 2007         |       |   | 2006 |  
|Accounts receivable                   |  | $            | 3,775 |   |      | $ | 6,950 |  
|Unbilled accounts receivable          |  |              | 719   |   |      |   | 311   |  
|                                      |  |              |       |   |      |   |       |  
|                                      |  |              | 4,494 |   |      |   | 7,261 |  
|Less: allowance for doubtful accounts |  |              | (320  | ) |      |   | (915  | )
|                                      |  |              |       |   |      |   |       |  
|                                      |  | $            | 4,174 |   |      | $ | 6,346 |  
|                                      |  |              |       |   |      |   |       |  

Bad debt expense was $(465) and $(61) for the years ended December 31, 2007 and 2006,
respectively.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Prepaid expenses and other current assets consist of the following:



|                     |  |              |       |      |   |    
|-------------------- |  | ------------ | ----- | ---- | - | ---
|                     |  | December 31,
|                     |  | 2007         |       | 2006
|Prepaid expenses     |  | $            | 887   |      | $ | 441
|Interest receivable  |  |              | 79    |      |   | 125
|Other current assets |  |              | 58    |      |   | 143
|                     |  |              |       |      |   |    
|                     |  | $            | 1,024 |      | $ | 709
|                     |  |              |       |      |   |    

Property and equipment consist of the following:



|                                                |  |             |  |              |        |   |      |   |        |  
|----------------------------------------------- |  | ----------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                |  |             |  | December 31, |       
|Class                                           |  | Useful Life |  | 2007         |        |   | 2006 |  
|Computer equipment                              |  | 3 - 5       |  | $            | 6,161  |   |      | $ | 6,706  |  
|Purchased software                              |  | 3           |  |              | 989    |   |      |   | 1,019  |  
|Office equipment                                |  | 5           |  |              | 324    |   |      |   | 528    |  
|Furniture and fixtures                          |  | 5           |  |              | 686    |   |      |   | 682    |  
|Leasehold improvements                          |  | lease term  |  |              | 129    |   |      |   | 487    |  
|Construction in process                         |  | N/A         |  |              | 307    |   |      |   |       |  
|                                                |  |             |  |              |        |   |      |   |        |  
|                                                |  |             |  |              | 8,596  |   |      |   | 9,422  |  
|Less: accumulated depreciation and amortization |  |             |  |              | (4,423 | ) |      |   | (7,604 | )
|                                                |  |             |  |              |        |   |      |   |        |  
|Net property and equipment                      |  |             |  | $            | 4,173  |   |      | $ | 1,818  |  
|                                                |  |             |  |              |        |   |      |   |        |  

Depreciation expense was $1,356 and $1,948 for the years ended December 31, 2007 and 2006,
respectively.

Capitalized software development costs consist of the following:



|                                        |  |              |        |   |      |   |        |  
|--------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                        |  | December 31, |       
|                                        |  | 2007         |        |   | 2006 |  
|Internal use software development costs |  | $            | 3,886  |   |      | $ | 3,274  |  
|Marketed software development costs     |  |              | 286    |   |      |   |       |  
|                                        |  |              |        |   |      |   |        |  
|                                        |  |              | 4,172  |   |      |   | 3,274  |  
|Less: accumulated amortization          |  |              | (2,486 | ) |      |   | (1,571 | )
|                                        |  |              |        |   |      |   |        |  
|                                        |  | $            | 1,686  |   |      | $ | 1,703  |  
|                                        |  |              |        |   |      |   |        |  

Amortization expense for capitalized software development costs was $1,011 and $999 for the years
ended December 31, 2007 and 2006, respectively.

Other assets consist of the following:



|                 |  |              |    |      |   |   
|---------------- |  | ------------ | -- | ---- | - | --
|                 |  | December 31,
|                 |  | 2007         |    | 2006
|Deposits         |  | $            | 54 |      | $ | 62
|Notes receivable |  |              |   |      |   | 21
|                 |  |              |    |      |   |   
|                 |  | $            | 54 |      | $ | 83
|                 |  |              |    |      |   |   



F-18



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Intangible assets consist of the following:



|                            |  |                       |       |                   |                         |                   |   |        |   |       |   |                         |  |   |        |  |   |        |   |  |   |      
|--------------------------- |  | --------------------- | ----- | ----------------- | ----------------------- | ----------------- | - | ------ | - | ----- | - | ----------------------- |  | - | ------ |  | - | ------ | - |  | - | -----
|                            |  | Useful life(In years) |       | December 31, 2007 |                         | December 31, 2006
|                            |  |                       | Gross |                   | AccumulatedAmortization |                   |   | Net    |   | Gross |   | AccumulatedAmortization |  |   | Net   
|Customer base               |  | 5                     |       | $                 | 10,206                  |                   | $ | (6,842 | ) |       | $ | 3,364                   |  | $ | 14,079 |  | $ | (7,234 | ) |  | $ | 6,845
|Developed technology        |  | 4                     |       |                   | 996                     |                   |   | (936   | ) |       |   | 60                      |  |   | 996    |  |   | (687   | ) |  |   | 309  
|Trademarks and company name |  | indefinite            |       |                   | 490                     |                   |   |       |   |       |   | 490                     |  |   | 490    |  |   |       |   |  |   | 490  
|Non-compete agreements      |  | 3                     |       |                   | 122                     |                   |   | (122   | ) |       |   |                        |  |   | 122    |  |   | (115   | ) |  |   | 7    
|                            |  |                       |       |                   |                         |                   |   |        |   |       |   |                         |  |   |        |  |   |        |   |  |   |      
|                            |  |                       |       | $                 | 11,814                  |                   | $ | (7,900 | ) |       | $ | 3,914                   |  | $ | 15,687 |  | $ | (8,036 | ) |  | $ | 7,651
|                            |  |                       |       |                   |                         |                   |   |        |   |       |   |                         |  |   |        |  |   |        |   |  |   |      

Amortization expense was $2,451 and $2,996 for the years ended December 31, 2007 and 2006,
respectively. As of December 31, 2007, the total of charges to be recognized in future periods from amortization of intangible assets are anticipated to be approximately $1,963 and $1,461 for the years ended December 31, 2008 and 2009,
respectively.

The changes in the carrying amount of goodwill are as follows:



|                                                                                        |  |                         |        |      |   |       
|--------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------
|                                                                                        |  | Years endedDecember 31,
|                                                                                        |  | 2007                    |        | 2006
|Beginning balance                                                                       |  | $                       | 12,017 |      | $ | 11,703
|Goodwill recorded in connection with achievement of contingent consideration milestones |  |                         |       |      |   | 314   
|                                                                                        |  |                         |        |      |   |       
|                                                                                        |  | $                       | 12,017 |      | $ | 12,017
|                                                                                        |  |                         |        |      |   |       

5. Stockholders Equity

Amended and Restated Certificate of Incorporation

In December 2003, the Company adopted an
Amended and Restated Certificate of Incorporation (the Certificate). The Certificate authorizes up to 20,000,000 shares of preferred stock, which enables the Board of Directors to designate and issue preferred stock with rights senior to
those of common stock.

Common Stock

The Company issued shares that are subject to vesting to employees and others in connection with certain business combinations that occurred in 2003, 2004 and 2005. Shares of restricted common stock are subject to repurchase by the Company,
pursuant to vesting schedules and achieving certain performance criteria, which generally extend for a period of up to four years. In the event of termination of employment, the Company has the option to repurchase the unvested shares at their
original issuance price. As of December 31, 2007 and 2006, there were 186,460 and 346,421 shares, respectively, subject to repurchase.

In December 2005, the Company completed a private placement and issued 4,500,000 shares of common stock at $3.00 per share for net proceeds of $12,316. In connection with the offering, the Company issued warrants to purchase 1,800,000
shares of our common stock at an exercise price of $3.50 per share expiring December 2, 2010.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



In December 2006, the Company completed a private placement and issued 4,000,000 shares of common
stock at $1.25 per share for net proceeds of $4,479. In connection with the offering, the Company issued warrants to purchase 1,200,000 shares of our common stock at an exercise price of $1.60 per share expiring December 2011. Concurrent with the
transaction, the Company entered into a Warrant Amendment Agreement pursuant to which the Company agreed to amend the exercise price on outstanding warrants issued in December 2005, exercisable for up to 1,800,000 shares of its common stock, to
$1.60 from $3.50.

In connection with each of the private placements noted above, the Company entered into registration rights agreements
with each of the respective investors covering the shares purchased and, as applicable, the shares subject to warrants. Those agreements generally require the company to file and maintain the effectiveness of a registration statement covering the
respective securities until the date which is the earlier of (i) five years after its effective date, (ii) such time as all of the registrable securities covered by such registration statement have been publicly sold by the investors, or
(iii) such time as all of the registrable securities covered by such registration statement may be sold by the investors pursuant to Rule 144(k) as determined by the counsel to the Company. In the event that the Company does not file and/or
maintain the effectiveness of a registration statement (a default), the Company must pay to each investor an amount in cash, as partial liquidated damages, equal to 1.0% (subject to reduction as described below) of the aggregate
investment amount paid by such investor for shares; and on each monthly anniversary of each such default (if the applicable default shall not have been cured by such date) until the applicable default is cured, the Company shall pay to each investor
an amount in cash, as partial liquidated damages, equal to 1.0% (subject to reduction as provided in the following sentence) of the aggregate investment amount paid by such investor for shares. After such time as the Company shall have become
obligated to any investor to make payments in aggregate of 4.0% of the aggregate investment amount paid by such investor for shares, then the amount of liquidated damages shall thereafter be reduced from 1.0% to 0.5% with respect to all damages
accruing in excess of 4.0% of the aggregate investment amount paid by such investor for shares. The amount of liquidated damages the Company is obligated to pay any investor is limited to 10% of the aggregate investment amount paid by such investor
for shares. As of December 31, 2007, the Company is, and has been, in compliance with each of the respective registration rights agreements.

Stock-Based Compensation Expense

In October 2000, the Company adopted the Kintera, Inc. 2000 Stock Option
Plan (2000 Plan). As amended following the initial public offering in December 2003, the Board of Directors determined that no further options would be granted under the 2000 Plan. A committee designated by the Board of Directors fixed
the terms and vesting of all options; however, in no event did the contractual term exceed 10 years. Generally, options granted prior to 2006 vest 25% one year from the grant date and 1/1,460 per day thereafter until the options are fully
vested, while options granted in 2006 vest 25% one year from the grant date and 1/48 per month thereafter until the options are fully vested.

In December 2003, the Company adopted the 2003 Equity Incentive Plan (2003 Plan). Under the 2003 Plan, as amended, the Company may grant various stock awards, including but not limited to stock options, up to 9,550,000
shares of common stock. The total number of awards which may be granted under the 2003 Plan is reduced, at all times by the number of stock options outstanding and shares issued under the 2000 Plan. As of December 31, 2006, the number of awards
which may be granted under the 2003 Plan is reduced by 2,159,826 for stock options outstanding and shares issued under the 2000 Plan. The 2003 Plan contains provisions which limit the number of stock awards granted to any individual employee in a
fiscal year.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



The 2004 Equity Incentive Plan (Fundware) (2004 Plan) was adopted by the Company in
December 2004 and provides for stock awards as an inducement for an individual to enter into service with the Company. The maximum number of awards which may be granted under the 2004 Plan is 500,000 shares and the maximum term of any option granted
under the 2004 Plan is ten years.

Options granted under the 2004 Plan and 2003 Plan become vested and exercisable at such times or upon
such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Compensation Committee of the Board of Directors.

As of December 31, 2007, 473,000 and 1,555,336 shares of the Companys common stock were available for grant under the 2004 Plan and 2003 Plan, respectively. No options were available for grant under the
2000 Plan at December 31, 2007.

Both the 2000 Plan and the 2003 Plan allow for employees to early exercise unvested stock options.
All unvested options exercised are subject to repurchase by the Company within 60 days of an employees termination. Unvested options are subject to repurchase at the original purchase price. As of December 31, 2007 and 2006, there
were 5,235 and 14,448 shares issued and outstanding from such options, subject to repurchase by the Company.

In December 2005, the Company
initiated a plan which resulted in the repricing of certain employee stock options and the acceleration of vesting for certain other employee stock options. An aggregate of 759,059 vested stock options with exercise prices greater than $3.00 were
repriced to the current market price of $2.92 and vesting was accelerated on 1,209,653 options. The Company recorded $38 in compensation expense relating to the repricing of stock options as the options were considered available under the provisions
of APB 25. The stock based compensation was determined as the difference between the effective date stock price of $2.92 and the market price on December 30, 2005 of $2.97.

In May 2006 the Board of Directors approved the Kintera Stock Option Exchange Program whereby eligible employees were offered the opportunity to exchange
certain vested options to purchase shares of the Companys common stock, par value $0.001 per share, with an exercise price per share greater than $7.00, that were outstanding under the 2000 Plan, the 2003 Plan and the 2004 Plan (the
Eligible Options). In exchange for the Eligible Options, tendering option holders received new options (the Replacement Options) to purchase shares of common stock. The Replacement Options were issued under the 2003 Plan. The
number of shares subject to a Replacement Option was the same number of vested shares of common stock that an eligible employee tendered pursuant to an Eligible Option. All Replacement Options were granted with an exercise price equal to 115% of the
closing price of the Companys common stock on June 30, 2006. Each Replacement Option was entirely unvested on the grant date and vests pro-rata on a daily basis over the two-year period beginning June 30, 2006. Each Replacement
Option maintained the original term and expiration date of the Eligible Option which was cancelled in exchange for the Replacement Option.

The offering period began on May 31, 2006 and expired at 5:00 p.m., Pacific Time, on June 28, 2006. Pursuant to the offer, the Company accepted for exchange options to purchase an aggregate of 687,164 shares of common stock,
representing approximately 72% of the options for 958,180 shares that were eligible to be tendered in the Offer as of May 31, 2006. On June 30, 2006, the Company granted options to purchase a maximum of 687,164 shares of common stock in
exchange for such tendered options.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



The exchange was accounted for as a modification in accordance with the provisions of FAS 123(R) and
accordingly the Company will recognize additional compensation cost of $366, which equals the excess of the fair value of the modified award over the fair value of the original award immediately before its terms were modified, with such additional
compensation cost being recorded over the two year vesting period of the modified award.

Stock option activity is as follows:



|                             |  |                 |   |  |                                |     
|---------------------------- |  | --------------- | - |  | ------------------------------ | ----
|                             |  | Numberof shares |   |  | Weighted-averageExercise price
|Balance at December 31, 2005 |  | 7,036,693       |   |  | $                              | 4.48
|Granted                      |  | 2,484,164       |   |  | $                              | 2.00
|Exercised                    |  | (148,838        | ) |  | $                              | 0.93
|Cancelled                    |  | (3,326,721      | ) |  | $                              | 5.09
|                             |  |                 |   |  |                                |     
|Balance at December 31, 2006 |  | 6,045,298       |   |  | $                              | 3.21
|Granted                      |  | 2,386,105       |   |  | $                              | 1.67
|Exercised                    |  | (136,323        | ) |  | $                              | 1.66
|Cancelled                    |  | (1,698,770      | ) |  | $                              | 3.83
|                             |  |                 |   |  |                                |     
|Balance at December 31, 2007 |  | 6,596,310       |   |  | $                              | 2.52
|                             |  |                 |   |  |                                |     

The aggregate intrinsic value for stock options outstanding and stock options exercisable as of
December 31, 2007, was $279 and $151, respectively, based on the Companys closing stock price of $1.49 per share as of December 31, 2007. The aggregate intrinsic value for stock options exercised during the year ended
December 31, 2007, was $45 representing the total pre-tax intrinsic value, based on the Companys closing stock price on each of the respective exercise dates. The weighted-average grant date fair value of stock options granted during the
years ended December 31, 2007 and 2006 was $1.09 and $1.16 per share, respectively. The total compensation cost related to nonvested awards not yet recognized amounted to $1,718 at December 31, 2007, which will be recognized over a
weighted-average period of 1.3 years.

The following table summarizes information about stock options outstanding at December 31,
2007:



|                        |  |                               |  |                                            |  |                                |  |                          |  |                                
|----------------------- |  | ----------------------------- |  | ------------------------------------------ |  | ------------------------------ |  | ------------------------ |  | -------------------------------
|                        |  | Options outstanding           |  | Options vested                            
|Range ofexercise prices |  | Number of options outstanding |  | Weighted average remainingcontractual life |  | Weighted averageexercise price |  | Number of options vested |  | Weighted average exercise price
|$0.06 - $1.60           |  | 1,445,271                     |  | 7.7 years                                  |  | $1.33                          |  | 324,916                  |  | $1.05                          
|$1.64 - $2.00           |  | 1,575,339                     |  | 7.9 years                                  |  | $1.81                          |  | 564,278                  |  | $1.96                          
|$2.13 - $2.24           |  | 1,023,479                     |  | 7.7 years                                  |  | $2.23                          |  | 423,521                  |  | $2.23                          
|$2.25 - $2.80           |  | 1,103,020                     |  | 7.8 years                                  |  | $2.57                          |  | 559,176                  |  | $2.59                          
|$2.81 - $7.70           |  | 1,297,247                     |  | 6.8 years                                  |  | $4.09                          |  | 1,088,382                |  | $4.03                          
|$7.71 - $16.67          |  | 151,954                       |  | 6.6 years                                  |  | $9.55                          |  | 128,788                  |  | $9.62                          
|                        |  |                               |  |                                            |  |                                |  |                          |  |                                
|$0.06 -$16.67           |  | 6,596,310                     |  | 7.6 years                                  |  | $2.52                          |  | 3,089,061                |  | $3.06                          
|                        |  |                               |  |                                            |  |                                |  |                          |  |                                

The weighted average remaining contractual life for options vested is 7.3 years.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



The following table presents details of stock-based compensation expense by functional line item
based on the fair value provisions of SFAS 123(R) for the years ended December 31, 2007 and 2006.



|                                |  |                         |       |      |   |      
|------------------------------- |  | ----------------------- | ----- | ---- | - | -----
|                                |  | Years endedDecember 31,
|                                |  | 2007                    |       | 2006
|Cost of revenue                 |  | $                       | 325   |      | $ | 442  
|Sales and marketing             |  |                         | 719   |      |   | 1,237
|Product development and support |  |                         | 397   |      |   | 537  
|General and administrative      |  |                         | 1,908 |      |   | 2,311
|                                |  |                         |       |      |   |      
|                                |  | $                       | 3,349 |      | $ | 4,527
|                                |  |                         |       |      |   |      

With the adoption of SFAS 123(R) on January 1, 2006, the Company is required to record the
fair value of stock-based compensation awards as an expense. In order to determine the fair value of stock options on the date of grant, the Company utilizes the Black-Scholes option-pricing model. Inherent in this model are assumptions related to
expected stock-price volatility, option life, risk-free interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected
stock-price volatility and option life assumptions require a greater level of judgment which make them critical accounting estimates. The Company uses an expected stock-price volatility assumption that is primarily based on historical realized
volatility of the underlying stock during a period of time. The Company estimates expected term consistent with the simplified method identified in Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based
Payment. The simplified method calculates the expected term as the average of the vesting and contractual terms of the award.

The fair
value of each option grant was estimated on the date of grant utilizing the Black-Scholes option-pricing model with the following assumptions:



|                                |  |               |  |             
|------------------------------- |  | ------------- |  | ------------
|                                |  | Stock Options
|For the year ended December 31, |  | 2007          |  | 2006        
|Risk-free interest rate         |  | 3.89%-4.77%   |  | 4.55%-5.10% 
|Average expected term (years)   |  | 5.38-6 years  |  | 4.53-6 years
|Expected volatility             |  | 70%           |  | 70%-75%     
|Dividend yield                  |  | 0%            |  | 0%          

Stock Warrants

In August 2003, the Company entered into a $3,000 Loan and Security Agreement with a bank. In connection with the Loan and Security Agreement, the Company issued a warrant to purchase 20,000 shares of
Series G preferred stock at $10.00 per share. The warrant is immediately exercisable and per its terms will expire on the latter of 10 years from issuance or 5 years after the closing of an initial public offering of common stock. The Company
completed its initial public offering in December 2003 at which time the warrant converted to the purchase of 20,000 shares of common stock at $10.00 per share and accordingly, will expire in 2008. The fair value of the warrant was estimated at $166
using the Black-Scholes method for option pricing. The assumptions used were 4.0% for the weighted average risk free rate, 80% expected stock price volatility, 0% expected dividend yield and 10 year expected warrant life. The fair value was
recorded as deferred line of credit financing costs to be amortized to interest expense over the thirty-six month repayment period. The Loan and Security Agreement was terminated in 2004 at which time the remaining deferred line of credit financing
costs were expensed.



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



In December 2005, the Company completed a private placement offering and in connection with the
offering issued warrants to purchase 1,800,000 shares of common stock at an exercise price $3.50 per share expiring in December 2010.

In
December 2006, the Company completed a private placement offering and in connection with the offering issued warrants to purchase 1,200,000 shares of common stock at an exercise price of $1.60 per share expiring December 2011. Concurrent with the
transaction, the Company entered into a Warrant Amendment Agreement pursuant to which the Company agreed to amend the exercise price on outstanding warrants issued in December 2005, exercisable for up to 1,800,000 shares of its common stock, to
$1.60 from $3.50.

Shares Reserved for Future Issuance

The following capital stock is reserved for future issuance:



|                                     |  |              |  |           
|------------------------------------ |  | ------------ |  | ----------
|                                     |  | December 31,
|                                     |  | 2007         |  | 2006      
|Stock options issued and outstanding |  | 6,596,310    |  | 6,045,298 
|Authorized for future option grants  |  | 2,027,586    |  | 2,712,543 
|Stock warrants                       |  | 3,020,000    |  | 3,020,000 
|Employee Stock Purchase Plan         |  | 1,581,564    |  | 1,366,843 
|                                     |  |              |  |           
|                                     |  | 13,225,460   |  | 13,144,684
|                                     |  |              |  |           

6. Income Taxes

The Company was in a net loss position in 2007 and 2006.

The provision for income taxes is composed of the
following:



|          |  |         |  |              |     |      |   |   
|--------- |  | ------- |  | ------------ | --- | ---- | - | --
|          |  |         |  | December 31,
|          |  |         |  | 2007         |     | 2006
|Current:  |  | State   |  | $            | 18  |      | $ | 28
|          |  |         |  |              |     |      |   |   
|          |  |         |  |              | 18  |      |   | 28
|          |  |         |  |              |     |      |   |   
|Deferred: |  | Federal |  |              | 348 |      |   |  
|          |  | State   |  |              | 93  |      |   | 25
|          |  |         |  |              |     |      |   |   
|          |  |         |  |              | 441 |      |   | 25
|          |  |         |  |              |     |      |   |   
|          |  |         |  | $            | 459 |      | $ | 53
|          |  |         |  |              |     |      |   |   



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



Significant components of the Companys deferred tax assets as of December 31, 2007 and
2006 are shown below. A valuation allowance has been recognized to offset the deferred tax assets as realization of such assets is uncertain.



|                                                    |  |              |         |   |      |   |         |  
|--------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                    |  | December 31, |        
|                                                    |  | 2007         |         |   | 2006 |  
|Deferred tax assets:                                |  |              |         |   |      |   |         |  
|Net operating loss carryforwards                    |  | $            | 38,606  |   |      | $ | 33,562  |  
|Research tax credit carryforwards                   |  |              |        |   |      |   | 4,111   |  
|Deferred revenue                                    |  |              | 6,229   |   |      |   | 6,824   |  
|Stock-based compensation                            |  |              | 2,106   |   |      |   | 1,203   |  
|Amortization of intangibles                         |  |              | 1,059   |   |      |   |        |  
|Other, net                                          |  |              | 1,939   |   |      |   | 2,734   |  
|                                                    |  |              |         |   |      |   |         |  
|Total deferred tax assets                           |  |              | 49,939  |   |      |   | 48,433  |  
|Deferred tax liability: Amortization of Intangibles |  |              | (441    | ) |      |   | (239    | )
|                                                    |  |              |         |   |      |   |         |  
|Net deferred tax assets before valuation allowance  |  |              | 49,498  |   |      |   | 48,195  |  
|Valuation allowance for net deferred tax assets     |  |              | (49,939 | ) |      |   | (48,195 | )
|                                                    |  |              |         |   |      |   |         |  
|Net deferred tax assets                             |  | $            | (441    | ) |      | $ |        |  
|                                                    |  |              |         |   |      |   |         |  

At December 31, 2007, the Company had federal and California tax net operating loss
carryforwards of approximately $93,173 and $50,113, respectively. The federal and California tax loss carryforwards will begin to expire in 2020 and 2012, respectively, unless previously utilized. The amount of the valuation allowance for which
subsequently recognized tax benefits will be applied directly to shareholders equity is approximately $490.

Should the deferred tax
assets associated with the Companys acquisitions ultimately be recognized, they will be allocated to reduce the goodwill recorded in the respective acquisition. Pursuant to Code Sections 382 and 383, use of the Companys net operating
loss carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

The
Company has established a valuation allowance for the entire amount of the deferred tax asset, due to uncertainty surrounding the ultimate realization of such asset. The valuation allowance increased by approximately $1,744 and $19,782 for the years
ended December 31, 2007 and 2006 respectively.

A reconciliation of the Companys income tax provision to the amount computed by
applying the statutory federal income tax rate to the pretax loss for the years ended December 31, 2007 and 2006 is as follows:



|                         |  |              |    |  |        |   
|------------------------ |  | ------------ | -- |  | ------ | --
|                         |  | December 31, |   
|                         |  | 2007         |    |  | 2006   |   
|Federal tax rate         |  | 35.00        | %  |  | 35.00  | % 
|State taxes              |  | 6.66         |    |  | 6.69   |   
|Stock-based compensation |  | (2.73        | )  |  | (2.12  | ) 
|Valuation allowance      |  | (40.97       | )  |  | (41.15 | ) 
|Other                    |  | (0.92        | )  |  | 1.42   |   
|                         |  |              |    |  |        |   
|Provision for taxes      |  | (2.96        | )% |  | (0.16  | )%
|                         |  |              |    |  |        |   



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##### Table of Contents

KINTERA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(in thousands, except share and per
share data)



7. Note Payable

On December 1, 2007 the Company executed a $3,161 note with IBM for the purchase of computer equipment. The note is collateralized by the underlying computer equipment, bears interest at a rate of 11.34% and has
a maturity date of November 30, 2010. Payments of $1,248 are due in 2008 and 2009 and payments of $1,144 are due in 2010. The balance of the note as of December 31, 2007 consisted of the following:



|                                  |  |                 
|--------------------------------- |  | ----------------
|                                  |  | December 31,2007
|Note payable                      |  | 3,087           
|Current portion of note payable   |  | 946             
|                                  |  |                 
|Long-term portion of note payable |  | 2,141           
|                                  |  |                 

8. Commitments and Contingencies

The Company leases facilities nationwide with its corporate headquarters in San Diego, California. The Company leases facilities in Greenwood Village,
Colorado; Eugene, Oregon; and San Francisco, California. The Company has obligations under a lease in Washington, DC which is currently being sublet.

Future minimum lease payments under all non-cancelable operating lease arrangements as of December 31, 2007 are as follows:



|                                  |  |                               |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |   |  |   |     |  |   |        |  
|--------------------------------- |  | ----------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ----- | - |  | - | --- |  | - | ------ | -
|                                  |  | Future Minimum Lease Payments |      
|                                  |  | 2008                          |       |   | 2009 |   |       | 2010 |  |   | 2011  |   |  | 2012 |       |   | Thereafter |   | Total |  
|Facilities leases                 |  | $                             | 1,407 |   |      | $ | 1,269 |      |  | $ | 1,304 |   |  | $    | 1,341 |   |            | $ | 896   |   |  | $ | 121 |  | $ | 6,338  |  
|Washington, DC Sublease           |  |                               | (208  | ) |      |   | (246  | )    |  |   | (256  | ) |  |      | (267  | ) |            |   | (242  | ) |  |   |    |  |   | (1,219 | )
|                                  |  |                               |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |   |  |   |     |  |   |        |  
|Net future minimum lease payments |  | $                             | 1,199 |   |      | $ | 1,023 |      |  | $ | 1,048 |   |  | $    | 1,074 |   |            | $ | 654   |   |  | $ | 121 |  | $ | 5,119  |  
|                                  |  |                               |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |   |  |   |     |  |   |        |  

Rent expense was $2,232 and $3,545 for the years ended December 31, 2007 and 2006,
respectively.

9. Employee Benefits

In
2001, the Company established a defined contribution 401(k) plan for employees who are at least 21 years of age and have been employed with the Company for at least three months. Under the terms of the plan, employees may make voluntary
contributions as a percent of compensation. The Companys contributions to the plan are discretionary. The Company did not make any contributions to the plan for the years ended December 31, 2007 and 2006.

10. Legal Proceedings

From time to time, we may be
involved in litigation relating to claims arising out of our operations. As of the date of this Annual Report, we are not a party to any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our
business, financial condition or operating results.



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##### Table of Contents

Kintera, Inc.

SCHEDULE II  CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS



|                                |  |                            |       |                             |   |      |                            |  |            |   |  |            |      |                      |  |   |    |  |   |    
|------------------------------- |  | -------------------------- | ----- | --------------------------- | - | ---- | -------------------------- |  | ---------- | - |  | ---------- | ---- | -------------------- |  | - | -- |  | - | ---
|Description                     |  | Balance atbeginningof Year |       | Charged toCosts andExpenses |   |      | Charge toOtherAccounts (a) |  | Deductions |   |  | Recoveries |      | Balance atEndof Year
|Year ended December 31, 2007:   |  |                            |       |                             |   |      |                            |  |            |   |  |            |      |                      |  |   |    |  |   |    
|Deducted from asset accounts:   |  |                            |       |                             |   |      |                            |  |            |   |  |            |      |                      |  |   |    |  |   |    
|Allowance for doubtful accounts |  | $                          | 915   |                             | $ | (465 | )                          |  | $          |  |  | $          | (136 | )                    |  | $ | 6  |  | $ | 320
|Year ended December 31, 2006:   |  |                            |       |                             |   |      |                            |  |            |   |  |            |      |                      |  |   |    |  |   |    
|Deducted from asset accounts:   |  |                            |       |                             |   |      |                            |  |            |   |  |            |      |                      |  |   |    |  |   |    
|Allowance for doubtful accounts |  | $                          | 1,382 |                             | $ | (61  | )                          |  | $          |  |  | $          | (470 | )                    |  | $ | 64 |  | $ | 915



|(a) | Amounts represent adjustments to the balance associated with acquisitions.
|--- | --------------------------------------------------------------------------



S-1