SC 13D/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D/A

Under the Securities Exchange Act of 1934

(Amendment No. 3)

Kana Software, Inc.

(Name of Issuer)

Common Stock, $0.001 par value per share

(Title of Class of Securities)

483600300

(CUSIP Number)

Robert B. Ashton

KVO Capital Management, LLC

44 S. Main Street, Box 17

Hanover, NH 03755

(603) 643-0500

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

January 30, 2009

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the following box. o

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No.   483600300
	(1)	Names of Reporting Persons: KVO Capital Management, LLC
	(2)	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x
	(3)	SEC Use Only
	(4)	Source of Funds (See Instructions): OO
	(5)	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	(6)	Citizenship or Place of Organization: Delaware
Number of Shares Beneficially Owned by Each Reporting Person With:			(7)	Sole Voting Power: 3,341,093
			(8)	Shared Voting Power: 0 (see Item 5)
			(9)	Sole Dispositive Power: 3,341,093
			(10)	Shared Dispositive Power: 0 (see Item 5)
	(11)	Aggregate Amount Beneficially Owned by Each Reporting Person: 3,341,093 (see Item 5)
	(12)	Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) o
	(13)	Percent of Class Represented by Amount in Row 11: 8.11%
	(14)	Type of Reporting Person (See Instructions): IA

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CUSIP No.   483600300
	(1)	Names of Reporting Persons: Kernan V. Oberting
	(2)	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x
	(3)	SEC Use Only
	(4)	Source of Funds (See Instructions): OO
	(5)	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	(6)	Citizenship or Place of Organization: United States
Number of Shares Beneficially Owned by Each Reporting Person With:			(7)	Sole Voting Power: 0
			(8)	Shared Voting Power: 3,341,093 (See Item 5)
			(9)	Sole Dispositive Power: 0
			(10)	Shared Dispositive Power: 3,341,093 (See Item 5)
	(11)	Aggregate Amount Beneficially Owned by Each Reporting Person: 3,341,093 (See Item 5)
	(12)	Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) o
	(13)	Percent of Class Represented by Amount in Row 11: 8.11%
	(14)	Type of Reporting Person (See Instructions): IN

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CUSIP No.   483600300
	(1)	Names of Reporting Persons: Robert B. Ashton
	(2)	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x
	(3)	SEC Use Only
	(4)	Source of Funds (See Instructions): PF
	(5)	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	(6)	Citizenship or Place of Organization: United States
Number of Shares Beneficially Owned by Each Reporting Person With:			(7)	Sole Voting Power: 0
			(8)	Shared Voting Power: 354,675 (see Item 5)
			(9)	Sole Dispositive Power: 0
			(10)	Shared Dispositive Power: 354,675 (see Item 5)
	(11)	Aggregate Amount Beneficially Owned by Each Reporting Person: 354,675 (See Item 5)
	(12)	Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) x
	(13)	Percent of Class Represented by Amount in Row 11: 0.9%
	(14)	Type of Reporting Person (See Instructions): IN

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Item 1.   Security and Issuer

This Amendment No. 3 to Schedule 13D (“Amendment No. 3”) relates to the Common Stock, $0.001 par value per share, of Kana Software, Inc. (“Kana”), which has its principal offices at 181 Constitution Drive, Menlo Park, California 94025.  This Amendment No. 3 amends and supplements, as set forth below, the information contained in Item 1, 3, 4 and 5 of the Schedule 13D filed by the Reporting Persons with respect to Kana on November 21, 2008, as previously amended (the “Schedule 13D”).  Except as amended by this Amendment No. 3, all information contained in the Schedule 13D is, after reasonable inquiry and to the best of the Reporting Persons’ knowledge and belief, true, complete and correct as of the date of this Amendment No. 3.

Item 3.   Source and Amount of Funds or Other Consideration

Item 3 of the Schedule 13D is hereby amended by adding the following paragraph:

The aggregate purchase price of the 330,000 shares purchased by KVO since December 17, 2008 was $234,911 (including commissions).  The source of funding for the purchase of these shares was the investment capital contained in the respective accounts.

Item 4.   Purpose of Transaction

Item 4 to Schedule 13D is amended by adding the following paragraph:

On January 30, 2009, KVO sent a letter to the Board of Directors of Kana, a copy of which is attached hereto as Exhibit 99.4 and incorporated herein by reference.

Item 5.   Interest in Securities of the Issuer.

(a) State the aggregate number and percentage of the class of securities identified pursuant to Item 1 (which may be based on the number of securities outstanding as contained in the most recently available filing with the Commission by the issuer unless the filing person has reason to believe such information is not current) beneficially owned (identifying those shares which there is a right to aquire) by each person named in Item 2. The above mentioned information should also be furnished with respect to persons who, together with any of the persons named in Item 2, comprise a group within the meaning of Section13(d)(3) of the Act;

(b) For each person named in response to paragraph (a), indicate the number of shares as to which there is sole power to vote or to direct the vote, sole power to dispose or to direct the disposition, or shared power to dispose or to direct the disposition. Provide the applicable information required by Item 2 with respect to each person with whom the power to vote or to direct the vote or to dispose or direct the disposition is shared;

KVO

a.     Amount beneficially owned: 3,341,093 (1)

b.     Percent of class: 8.11%

c.     Number of shares as to which such person has:

i.      Sole power to vote or to direct the vote: 3,341,093 (1)

ii.     Shared power to vote or to direct the vote: 0

iii.    Sole power to dispose or to direct the disposition of: 3,341,093 (1)

iv.    Shared power to dispose or to direct the disposition of: 0

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(1)           Includes 354,675 shares held in a private account on behalf of Mr. Ashton, a portfolio manager of KVO, over which KVO has both voting and dispositive power pursuant to contract.  KVO’s voting and dispositive power over these shares is revocable only if Mr. Ashton terminates his employment with KVO, at which time the right to vote and dispose of those shares will revert to him.  Also includes 2,986,418 shares held in other private accounts over which KVO has both voting and dispositive power pursuant to contract.  KVO’s voting and dispositive power over these shares is revocable on or after December 31, 2010.

Kernan V. Oberting

1. Amount beneficially owned: 3,341,093 (2)

2. Percent of class: 8.11%

3. Number of shares as to which such person has:

i.              Sole power to vote or to direct the vote: 0

ii.             Shared power to vote or to direct the vote: 3,341,093 (2)

iii.            Sole power to dispose or to direct the disposition of: 0

iv.            Shared power to dispose or to direct the disposition of: 3,341,093 (2)

(2)           Mr. Oberting is the Managing Member of KVO.  By reason of the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”), Mr. Oberting may be deemed to beneficially own all of the shares that KVO is deemed to beneficially own.  Mr. Oberting disclaims beneficial ownership of any of the securities covered by this Schedule 13D.

Robert B. Ashton

1. Amount beneficially owned: 354,675 (3) (4)

2. Percent of class: 0.9%

3. Number of shares as to which such person has:

i.      Sole power to vote or to direct the vote: 0

ii.     Shared power to vote or to direct the vote: 354,675 (3) (4)

iii.    Sole power to dispose or to direct the disposition of: 0

iv.    Shared power to dispose or to direct the disposition of: 384,675 (3) (4)

(3)           Consists of 354,675 shares held in a private account on behalf of Mr. Ashton over which KVO has both voting and dispositive power pursuant to contract.  KVO’s voting and dispositive power over these shares is revocable only if Mr. Ashton terminates his employment with KVO, at which time the right to vote and dispose of those shares will revert to him.  By reason of the provisions of Rule 13d-3 of the Exchange Act, Mr. Ashton may be deemed to beneficially own these shares.

(4)           Does not include 2,986,418 shares held in additional private accounts over which KVO has both voting and dispositive power pursuant to contract.  Though Mr. Ashton does not have actual control over

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the voting, acquisition or disposition of these shares, by virtue of his role a portfolio manager for KVO, he may be deemed to have effective control with respect thereto, and may be deemed to beneficially own them by reason of the provisions of Rule 13d-3 of the Exchange Act.  Mr. Ashton disclaims beneficial ownership of these shares.

(c) Describe any transactions in the class of securities reported on that were effected during the past sixty days or since the most recent filing of Schedule 13D, whichever is less, by the persons named in response to paragraph (a).

See Appendix A for a list of transactions effected by KVO for the private accounts since the Schedule 13D was amended on January 12, 2009.

(d) If any other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities, a statement to that effect should be included in response to this item and, if such interest relates to more than five percent of the class, such person should be identified. A listing of the shareholders of an investment company registered under the Investment Company Act of 1940 or the beneficiaries of an employee benefit plan, pension fund or endowment fund is not required.

Not applicable

(e) If applicable, state the date on which the reporting person ceased to be the beneficial owner of more than five percent of the class of securities.

Not applicable

Item 7.   Material to be Filed as Exhibits.

99.1         Joint Filing Agreement

99.2         Letter Agreement with Kana Software, Inc. and KVO Capital Management, LLC dated as of November 10, 2008*

99.3         Letter to Kana Software, Inc. requesting its stockholder list and related materials dated as of January 12, 2009*

99.4         Letter to Board of Directors of Kana Software, Inc. dated as of January 30, 2009

* Previously filed.

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Appendix A

Transactions in Kana Software, Inc. common stock by KVO

Transaction  Date	No. of Shares	Purchase/  Sale	Avg. Price per  Share		Total Price
1/13/2009	2,500	Purchase	$	0.66	$	1,650
1/20/2009	309,100	Purchase	$	0.71	$	219,461
1/21/2009	18,400	Purchase	$	0.75	$	13,800

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SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

	KVO CAPITAL MANAGEMENT, LLC
Date: January 30, 2009	By:	/s/ Kernan V. Oberting
	Name: Kernan V. Oberting
	Its: Managing Member
Date: January 30, 2009	/s/ Kernan V. Oberting
	Kernan V. Oberting
Date: January 30, 2009	/s/ Robert B. Ashton
	Robert B. Ashton

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EX-99.4

Exhibit 99.4

[KVO Letterhead]

January 30, 2009

Board of Directors

Kana Software, Inc.

181 Constitution Drive

Menlo Park, California 94025

Dear Members of the Board of Directors of Kana Software, Inc.:

In our original filing on Schedule 13D in November 2008, we recommended that Kana Software, Inc. (“Kana” or the “Company”) immediately slash expenses to ensure sustainable positive cash flow on a quarterly basis, substantially modify its rights plan (a 4.9% poison pill), and pursue the sale of the Company.  Since our filing, the Company has neither announced the expense cuts we consider necessary for Kana to become a viable enterprise, nor announced its intention to commence the sale of the Company.  In fact, the only public action taken by the Board of Directors has been to further entrench itself and management by extending the duration of the 4.9% poison pill and amending the Company’s bylaws relative to the removal of directors.

Our Concerns Relative to Dilutive Financings

Kana has an uninterrupted 12 year history of negative operating cash flow and operating losses.  The table below summarizes the prior four years operating cash flow and net proceeds from the issuance of stock and warrants, based upon information reported by the Company in its filings with the SEC:

		OperatingCash Flow(1)			Net proceeds from Stock/Warrant Issuance(1)
	2008 (through September 30, 2008)	$	(2.2	)	—
	2007	$	(8.4	)	$	10.4
	2006	$	(1.7	)	$	2.9
	2005	$	(16.3	)	$	6.3
	Totals	$	(28.6	)	$	19.6
(1) In millions.

As demonstrated above, Kana has continued to cover its negative cash flow with the repeated issuance of shares rather than the necessary operational changes and expense cuts.

Over the past six months, the Company has represented both publicly on conference calls and in private statements to the undersigned that it will not seek to raise more equity capital. If Kana breaks this vow and moves to raise equity capital, we believe it would be a serious breach

of the Board of Directors’ fiduciary duties to its shareholders in light of the alternatives available to the Company.

NOLs as a Pretext for Director Entrenchment

We are very troubled by the Board’s recent action to extend for three years the 4.9% poison pill purportedly to preserve net operating losses (NOLs). When implemented in January of 2006, the Board stated that it believed the Company’s net operating losses were a substantial asset of Kana. Yet pursuant to its own accounting policies and as demonstrated in the Company’s financial statements, Kana has ascribed no value to its NOLs because the Company itself believes that the likelihood this deferred tax asset will be recovered from future income is, in ever-clear accounting speak, “not more likely than not.” The plain English translation: you have no realistic belief that the Company will realize the benefit of the NOLs.

The paradox between the Board’s stated basis for the 4.9% poison pill and the zero valuation of that deferred tax asset is inexplicable and raises serious questions as to the directors’ real motives behind the existence and recent extension of the pill. The effect of a 4.9% NOL poison pill, when coupled with one director’s beneficial ownership of nearly 20% of the Company, is to provide job security to a Board of Directors and management team that has failed to achieve even a modicum of financial success.

We have a mounting concern that the Board’s actual intentions may revolve around a strategy aimed at turning the Company into a so-called “NOL shell” by selling off Kana’s assets and using the corporate shell as a special purpose acquisition company (commonly known as a SPAC). Such a transaction would be highly speculative and wholly-unrelated to Kana’s existing business purpose. Moreover, it would not serve to permit shareholders to realize the full value of the Company as it exists today. Were it pursued, such course of action would appear no less than a misguided, self-interested effort by the members of the Board of Directors and management to avoid being held accountable by shareholders for their dismal record in managing the Company’s existing business.

Conclusion

As an 8.1% holder in Kana, we want to be clear that we have not invested in the Company based upon any confidence in the failed strategies of the CEO and Board of Directors. Our investment is based upon our belief that the shares of Kana common stock are undervalued in relation to what could be realized either in the sale of the Company or under management that understood the immediate need to control costs. We believe Kana shares are trading at a significant discount to their potential value as a result of poor management execution, the Board’s failed history of leadership, concern that the Board will conduct yet another dilutive capital raise, and continued ongoing efforts to entrench the Board and management through the extension of the 4.9% pill and bylaw amendments.

We would like to remind the Board of Directors of the Company that their obligation is to the shareholders. We plan to monitor closely the continued activities of the Board and management and will hold both directly accountable for decisions made. We strongly reiterate our position from November 2008 that the Company retain an investment banker immediately

and initiate an auction for the sale of the Company and that the Board and management make material changes to the Company’s expense structure to ensure sustainable positive cash flow.

Sincerely,

Robert Ashton

KVO Capital Management, LLC