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As filed with the Securities and Exchange Commission on November 3, 2004

Registration No. 333-118307



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Amendment No. 3
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


KINTERA, INC.
(Exact name of Registrant as specified in its charter)

Delaware
State or other jurisdiction of
incorporation or organization)
  7372
(Primary standard industrial
classification code number)
  74-2947183
(I.R.S. Employer Identification Number)

    
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

Harry E. Gruber, M.D.
President and Chief Executive Officer
Kintera, Inc.
9605 Scranton Road, Suite 240
San Diego, California 92121
(858) 795-3000

Copies to:
Scott M. Stanton, Esq.
Laura G. Sand, Esq.
Morrison & Foerster LLP
3811 Valley Centre Dr., Suite 500
San Diego, California 92130
(858) 720-5100


Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.


        If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), check the following box.    ý

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.    o


        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.




Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

(Subject to Completion, dated November 3, 2004)

PRELIMINARY PROSPECTUS

2,694,998 Shares

GRAPHIC

Common Stock


        This prospectus relates to the resale of 2,694,998 shares of our common stock held by certain of our stockholders. We are registering our common stock for resale by these selling stockholders who may offer such shares for sale from time to time at market prices prevailing at the time of sale or at privately negotiated prices. The selling stockholders may sell the shares directly to purchasers or through underwriters, broker-dealers or agents, that may receive compensation in the form of discounts, concessions or commissions. We will not receive any proceeds from this offering. See "Plan of Distribution." We will bear costs relating to the registration of these shares.

        Our common stock is traded on the Nasdaq National Market under the symbol "KNTA." On October 1, 2004, the last reported sales price for our common stock as quoted on the Nasdaq National Market was $9.80 per share.

        Our business and an investment in our common stock involve significant risks. These risks are described under the caption "Risk Factors" beginning on Page 2 of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

November     , 2004



PROSPECTUS SUMMARY

        The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and notes thereto appearing elsewhere in this prospectus. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including the risk factors and consolidated financial statements and accompanying notes included in this prospectus.

The Company

        We are an innovative provider of software that enables nonprofit organizations to use the Internet to increase donations, reduce fundraising costs and build awareness and affinity for an organization's cause by bringing their employees, volunteers and donors together in online, interactive communities. Our flagship product, Kintera Sphere, is managed as a single system and offered as a service accessed with a web browser. Nonprofit organizations raised approximately $241 billion in donations in 2002, and many of the more than 1.3 million nonprofit organizations registered in the United States have begun using Internet tools to enhance their fundraising and communication efforts.

        Kintera Sphere is an enterprise grade software suite that provides content management, contact management, communication, commerce, community and reporting, all of which are built on a unified database and payment processing engine. Our system automates the workflow of a nonprofit organization's employees, volunteers and donors, facilitating better communication and more effective fundraising. Using Kintera Sphere, nonprofit organizations can motivate and reward community members with timely feedback, personalized communications and targeted content. By building a stronger sense of community, nonprofit organizations can increase the commitment of employees, volunteers and donors and improve the success of their fundraising efforts.

        Under contracts which are typically one year or more in duration, nonprofit organizations pay Kintera upfront and monthly service fees for access to Kintera Sphere and transaction based fees tied to the donations and purchases we process. We believe our software-as-a-service model reduces our customers' software and related infrastructure maintenance, upgrade and support costs, thereby providing them with significant features and benefits at an attractive price.

        Since launching our service in the first quarter of 2001, we have signed contracts with over 500 nonprofit organizations, some of which have hundreds of individual chapters or divisions. Our customers include both national and local health organizations, educational institutions, religious institutions, professional associations, political organizations, civic organizations and other charities. Current customer relationships that illustrate our national and local customer base and target markets include the American Cancer Society, the American Heart Association, American Lung Association, Big Brothers Big Sisters of America and Special Olympics. Usage of our Kintera Sphere has grown rapidly. Our total online donations processed have grown from $27.0 million for the twelve months ended June 30, 2003 to $70.9 million for the twelve months ended June 30, 2004.

        Our principal offices are located at 9605 Scranton Road, Suite 240, San Diego 92121. Our telephone number is 858-795-3000. Our website address is www.kintera.com. The information contained on our website is not intended to be incorporated by reference into this prospectus.

The Offering

        On July 20, 2004, we completed the sale of 2,500,000 shares of our common stock for gross proceeds of $20.0 million in a private transaction with certain of our existing stockholders, which we refer to in this prospectus as the private placement. This prospectus relates to the resale of up to 2,500,000 shares of our common stock sold in the private placement, as well as the resale of an additional 194,998 shares of our common stock that we issued to four stockholders in connection with our acquisitions of Prospect Information Network, LLC in February 2004 and Carol/Trevelyan Strategy Group in March 2004. We are registering our common stock for resale by the selling stockholders. The prices at which these stockholders may sell the shares will be determined by the prevailing market for the shares or in negotiated transactions. See "Plan of Distribution."

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RISK FACTORS

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

Risks Related To Our Business

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

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

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

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

    we may not successfully expand our sales and marketing efforts;

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

    we may not effectively manage our anticipated growth.

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

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

        We have experienced operating and net losses in each fiscal quarter since our inception, and as of June 30, 2004, we had an accumulated deficit of $42.7 million. We incurred net losses of $8.9 million for the six months ended June 30, 2004. We will need to increase revenues to achieve profitability, and we may not be able to do so. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. We also may fail to accurately estimate our increased operating expenses as we grow. If our operating expenses exceed our expectations, our financial performance will be adversely affected.

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

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

    difficulties in integrating operations, technologies, services, accounting and personnel;

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    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 revenues to offset acquisition or investment costs.

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

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

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

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

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

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

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

        It typically takes us between three and nine months to complete a sale to a major customer account, but it can take us up to one year or longer. It is therefore difficult to predict the quarter in which a particular sale will occur and to forecast our sales. The period between our initial contact with

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a potential customer and its purchase of Kintera Sphere is relatively long due to several factors, including:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

        If nonprofit organizations believe Kintera Sphere to be unreliable, they will be unlikely to use Kintera Sphere which will harm our revenue and profits. Our systems and operations are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunication failures, electronic virus or worm attacks and similar events. They also could be subject to break-ins, sabotage

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and intentional acts of vandalism. Our business interruption insurance may not be sufficient to compensate us for losses that may occur. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities could result in interruptions in our services. Interruptions in our service could harm our reputation and reduce our revenues and profits.

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

        Our operating results have varied significantly in the past and will likely vary in the future as the result of fluctuations in our revenues and operating expenses. For example, our revenues increased from $2.9 million for the six months ended June 30, 2003 to $9.0 million for the six months ended June 30, 2004 and our net loss increased from $4.7 million for the six months ended June 30, 2003 to $8.9 million for the six months ended June 30, 2004. We expect that our operating expenses may increase in the future as we expand our selling and marketing activities and hire additional personnel. Our revenues in any period depend substantially on the number and size of donations that we process in that period for customer sponsored fundraising events. As a result, it is possible that in some future periods, our revenues may not meet our expectations or, due to our increased expense levels, our results of operations may be below the expectations of current or potential investors. If this occurs, the price of our common stock may decline.

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

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

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

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

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

        To execute our growth plan, we need to significantly increase the size of our sales force and software development staff. To successfully meet our objectives, we must attract and retain highly qualified sales and software development personnel with specialized skill sets focused on the nonprofit industry. Competition for qualified sales and software development personnel can be intense, and we cannot assure you that we will be successful in attracting and retaining them. The pool of qualified personnel with experience working with or selling to non-profit organizations is limited. Our ability to expand our sales team will depend on our ability to recruit, train and retain top quality people with advanced skills who understand sales to nonprofit organizations. Because the sale of online fund raising

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solutions is still relatively new, there is a shortage of sales personnel with the experience we need. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications for our business. In addition, it takes time for our new sales personnel to become productive, particularly with respect to obtaining major customer accounts. In many cases, newly hired sales personnel are unable to develop their skills rapidly enough, which results in a relatively high turnover rate and a corresponding increased need to make continual new hires. If we are unable to hire or retain qualified sales and software development personnel, or if newly hired personnel fail to develop the necessary skills or reach productivity slower than anticipated, it would be more difficult for us to sell our solution, and we may experience a shortfall in revenues and not achieve our planned growth.

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

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

    traditional fundraising methods;

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

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

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

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

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

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

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

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

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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 revenues and prospects for growth.

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

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

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

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

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

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

        In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation, as amended, and our bylaws, as amended, and Delaware law could make it more difficult for stockholders or

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potential acquirors to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including delaying or impeding a merger, tender offer, or proxy contest or other change of control transaction involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could prevent the consummation of a transaction in which our stockholders could receive a substantial premium over the then current market price for their shares.

Risks Related to this Offering

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

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

    actual or anticipated fluctuations in our results of operations;

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

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

    developments with respect to our or our competitors' intellectual property rights;

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

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

    the trading volume of our common stock;

    conditions and trends in the nonprofit industry;

    changes in our pricing policies or the pricing policies of our competitors;

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

    general economic and geopolitical conditions.

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

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

        Our executive officers, directors and their affiliates, in the aggregate, beneficially own approximately 41.4% of our outstanding common stock. As a result, these persons, acting together, will have the ability to determine the outcome of all matters submitted to our stockholders for approval, including the election and removal of directors and any significant transaction involving us. In addition, these persons, acting together, will have the ability to control the management and affairs of our company. This concentration of ownership may harm the market price of our common stock by, among other things:

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

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

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

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

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

        Our capital requirements will depend on many factors, including:

    acceptance of, and demand for, Kintera Sphere;

    the costs of developing new products, services or technology;

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

    the number and timing of acquisitions and other strategic transactions; and

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

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

10



FORWARD LOOKING STATEMENTS

        This prospectus contains forward looking statements that involve risks and uncertainties. The forward looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward looking statements. Forward looking statements include, but are not limited to, statements about:

    marketing and commercialization of our products and services;

    our estimates for future revenues, expenses and profitability;

    our ability to attract customers and enter into customer contracts;

    our estimates regarding our capital requirements and our needs for additional financing;

    plans for future products and services and for enhancements of existing products and services;

    our patent applications and licensed technology;

    our plans to pursue strategic alliances and acquisitions; and

    sources of revenues and anticipated revenues and the continued viability and duration of those agreements.

        In some cases, you can identify forward looking statements by terms such as "may," "might," "will," "should," "could," "would," "expect," "believe," "intend," "estimate," "predict," "potential," or the negative of these terms, and similar expressions intended to identify forward looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward looking statements. We discuss many of these risks in this prospectus in greater detail under the heading "Risk Factors." Also, these forward looking statements represent our estimates and assumptions only as of the date of this prospectus.

        This prospectus contains statistical data that we obtained from industry publications and other industry sources, including reports generated by Giving USA and other third parties. These industry publications generally indicate that they have obtained their information from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information. Although we believe that the publications are reliable, we have not independently verified their data.

        You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward looking statements by these cautionary statements.

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TRADEMARKS

        Kintera, the Kintera logo, Kintera Sphere, Friends Asking Friends, Kintera Thon, Knowledge Interaction, Honor Roll, Volunteer Interactive Pyramid, Kintera VIP, Kintera Gala, Kintera Golf, KindMark, Kamtech and Giving Capital are our trademarks, trade names or service marks. Each trademark, trade name or service mark of another company appearing in this prospectus belongs to its holder, and does not belong to us.


USE OF PROCEEDS

        We will not receive any proceeds from the sale by the selling stockholders of the shares of common stock offered by this prospectus.


PRICE RANGE OF COMMON STOCK

        Our common stock has been traded on the NASDAQ National 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 National Market of the common stock for the periods indicated, as reported by NASDAQ.

 
  High
  Low
Year ended December 31, 2004            
  First quarter   $ 18.00   $ 9.70
  Second quarter   $ 17.73   $ 7.00
  Third quarter   $ 10.85   $ 5.25
  Fourth quarter (through October 6, 2004)   $ 10.13   $ 9.37

Year ended December 31, 2003

 

 

 

 

 

 
  Fourth quarter (since December 19, 2003)   $ 12.90   $ 7.91


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.

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DILUTION

        The pro forma net tangible book value per share of our common stock will be substantially below an assumed public offering price of $9.80. Our pro forma net tangible book value as of June 30, 2004 (after giving effect to the sale of 2,500,000 shares of our common stock on July 20, 2004 for net proceeds of $18.6 million) was approximately $49.8 million, or approximately $1.80 per share. Pro forma net tangible book value per share represents our total net tangible assets as of June 30, 2004 (after giving effect to the receipt of $18.6 million from the sale of our common stock on July 20, 2004), divided by the number of shares of our common stock outstanding at June 30, 2004 plus 2,500,000 shares of common stock sold on July 20, 2004. Dilution in pro forma net tangible book value per share represents the difference between the amount per share of our common stock that you pay and the pro forma net tangible book value per share of our common stock immediately afterwards. Assuming an offering price of $9.80, you will incur immediate and substantial dilution of $8.00 per share. The actual prices at which the selling stockholders may sell shares of our common stock will vary from time to time. Therefore, the actual amount of dilution that you will experience, if any, will depend upon the price at the time of your purchase.

        The following table illustrates this dilution per share:

Assumed offering price per share   $ 9.80
Pro forma net tangible book value per share as of June 30, 2004   $ 1.80
   
Dilution per share to you   $ 8.00
   

        The above table does not assume the following:

    Assumes no exercise of options or warrants after June 30, 2004. As of June 30, 2004, there were options outstanding to purchase a total of 3,062,571 shares of common stock at a weighted average exercise price of $4.35 per share. To the extent outstanding options are exercised, you would experience further dilution. In addition, to the extent there are purchases made under our employee stock purchase plan or warrants are exercised, you may experience further dilution.

    Excludes the issuance of 180,231 shares of restricted stock issued in connection with the acquisitions of Kindmark, Kamtech, Inc., and Giving Capital that were completed subsequent to June 30, 2004.

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SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

        The consolidated statements of operations data for the years ended December 31, 2001, 2002 and 2003, and the consolidated balance sheet data as of December 31, 2002 and 2003, are derived from our audited consolidated financial statements which have been audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, and are included elsewhere in this prospectus. The selected consolidated statement of operation for the period from February 8, 2000 (inception) to December 31, 2000, and the consolidated balance sheet data as of December 31, 2000 are derived from the audited financial statements which are not included in this prospectus. Historical results are not indicative of future results. The selected consolidated statements of operations data for the six month periods ended June 30, 2003 and 2004 and the selected consolidated balance sheet data as of June 30, 2004, have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements. The selected financial data set forth below contains only a portion of Kintera's financial statements, and should be read in conjunction with the financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. In particular, see Note 1 to our financial statements for the year ended December 31, 2003 and the six months ended June 30, 2004 for an explanation of the calculations of earnings per share and per share amounts.

 
  Period from February 8, 2000 (inception) to December 31, 2000
   
   
   
  Six Months Ended June 30,
 
 
  Year Ended December 31,
 
 
  2001
  2002
  2003
  2003
  2004
 
Consolidated Statements of Operations Data:                                      
Net revenues   $ 24   $ 287   $ 1,933   $ 7,490   $ 2,945   $ 8,964  
Revenue from related party                 475          
   
 
 
 
 
 
 
Total net revenues     24     287     1,933     7,965     2,945     8,964  
Cost of revenues     7     46     323     1,386     587     1,774  
   
 
 
 
 
 
 
  Gross profit     17     241     1,610     6,579     2,358     7,190  
Sales and marketing     516     9,045     6,038     7,863     3,684     6,819  
Product development and support     768     2,433     2,465     3,467     1,553     3,659  
General and administrative     949     1,485     1,989     2,256     903     3,466  
Stock-based compensation(1)             551     2,846     882     2,283  
   
 
 
 
 
 
 
  Total operating expenses     2,233     12,963     11,043     16,432     7,022     16,227  
   
 
 
 
 
 
 
Loss from operations     (2,216 )   (12,722 )   (9,433 )   (9,853 )   (4,664 )   (9,037 )
Interest income and other     115     284     17     (19 )   10     128  
   
 
 
 
 
 
 
Net loss   $ (2,101 ) $ (12,438 ) $ (9,416 ) $ (9,872 ) $ (4,654 )   (8,909 )
   
 
 
 
 
 
 

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Basic and diluted   $ (2.08 ) $ (3.86 ) $ (1.44 ) $ (0.97 )   (0.52 )   (0.38 )
   
 
 
 
 
 
 

Number of shares used in per share computations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Basic and diluted     1,008     3,223     6,545     10,160     8,952     23,176  
   
 
 
 
 
 
 

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  As of December 31,
  As of June 30,
 
  2001
  2002
  2003
  2004
 
   
   
   
  (unaudited)

Consolidated Balance Sheet Data:                        
  Cash and cash equivalents   $ 2,445   $ 1,235   $ 38,480   $ 8,966
  Total assets   $ 5,377   $ 5,637   $ 47,757   $ 45,625
  Line of credit, net of current portion   $   $   $   $ 6
  Total stockholders' equity   $ 4,426   $ 3,764   $ 42,153   $ 39,399

(1)
Stock-based compensation for the years ended December 31, 2002 and 2003 and the six months ended June 30, 2003 and 2004 includes the following:

 
  Year Ended December 31,
  Six Months Ended June 30,
 
  2002
  2003
  2003
  2004
 
  (in thousands)

   
   
Sales and marketing   $ 369   $ 1,668   $ 507   $ 1,447
Product development and support   $ 170   $ 816     341     393
General and administrative   $ 12   $ 362     34     443
   
 
 
 
    $ 551   $ 2,846   $ 882   $ 2,283
   
 
 
 

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with the consolidated financial statements and the related notes contained elsewhere in this prospectus. In addition to historical information, the following discussion contains forward looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled "Risk Factors" and elsewhere in this prospectus.

Overview

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

        Since inception, we have significantly increased our revenues through a combination of factors, including obtaining new customers, expanding existing customer relationships, acquiring complementary businesses, expanding the features of Kintera Sphere and increasing the number and amount of donations we process that result in transaction-based fees. Although our revenues have increased substantially in recent periods, we have experienced significant net losses and negative cash flows from operations in each fiscal period since inception, and as of June 30, 2004, we had an accumulated deficit of $42.7 million.

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

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

        We currently market Kintera Sphere through a direct sales force that includes personnel located in our corporate headquarters and throughout the United States. To date, we have signed contracts with over 500 nonprofit organizations, some of which have hundreds of individual chapters or divisions. Our customers include health organizations, educational institutions, religious institutions, professional associations, political organizations, civic organizations and other charities, at both a local and national level. We expect that a small group of nonprofit organizations in each fiscal period generally will account for a large portion of our revenues. The significance of a particular customer or group of customers in a given period will depend on the nature and size of their fundraising events in that

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period as well as the scope of their use of Kintera Sphere. To continue our revenue growth, we must both obtain new customers and expand our existing customer relationships through usage of Kintera Sphere for new campaigns.

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

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

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

        In August 2004, we completed the acquisition of certain intellectual property and other assets of KindMark, a developer of corporate giving solutions to help corporations and nonprofits automate and support their workplace giving programs. We issued approximately 58,000 shares of restricted common stock and paid $145,000 in cash. Up to approximately 130,000 additional shares of common stock are being held in escrow and may be released to the stockholder of KindMark if the revenue generated from KindMark's business during the year following the closing of the transaction meets certain targets. Some of the shares issued are being held in escrow to secure the obligations of KindMark and its stockholder.

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

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

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Cost of Revenues and Operating Expenses

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

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

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

        Gen