SEC FORM 4

SEC Form 4

FORM 4

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
or Section 30(h) of the Investment Company Act of 1940

OMB APPROVAL

OMB Number:			3235-0287
Estimated average burden
hours per response:			0.5

Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

1. Name and Address of Reporting Person^*

NightWatch Capital Management, LLC

(Last)

(First)

(Middle)

3311 NORTH UNIVERSITY AVENUE

SUITE 200

(Street)

PROVO

84604

(City)

(State)

(Zip)

2. Issuer Name and Ticker or Trading Symbol
KANA SOFTWARE INC [ KANA.PK ]

5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)

Director	X	10% Owner
Officer (give title below)		Other (specify below)

3. Date of Earliest Transaction (Month/Day/Year)
10/09/2006

4. If Amendment, Date of Original Filed (Month/Day/Year)

6. Individual or Joint/Group Filing (Check Applicable Line)

X	Form filed by One Reporting Person
	Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction Code (Instr. 8)		4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5)			5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4)	6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	Amount	(A) or (D)	Price		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
Common Stock	10/09/2006		J⁽¹⁾		49,485	A	⁽¹⁾	5,967,273	I	See Footnotes (2), (3) and (4)⁽²⁾⁽³⁾⁽⁴⁾

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	4. Transaction Code (Instr. 8)		5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)		6. Date Exercisable and Expiration Date (Month/Day/Year)		7. Title and Amount of Securities Underlying Derivative Security (Instr. 3 and 4)		8. Price of Derivative Security (Instr. 5)	9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)	10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	(A)	(D)	Date Exercisable	Expiration Date	Title	Amount or Number of Shares	8. Price of Derivative Security (Instr. 5)		10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)

Explanation of Responses:

1. Kana Software, Inc. and the NW Funds (as defined in footnote (2)) have agreed that the NW Funds will receive the Common Stock to which this note relates as compensation for certain amendments to the original purchase agreement between them.

2. The shares of Common Stock to which this note relates are held directly by NightWatch Capital Partners, L.P., a Delaware limited partnership ("NWCP"), with respect to 3,219,223 shares of Common Stock, and NightWatch Capital Partners II, L.P., a Delaware limited partnership ("NWCP II" and collectively with NWCP, the "NW Funds"), with respect to 2,748,050 shares of Common Stock.

3. NightWatch Capital Advisors, LLC (the "Investment Manager") serves as investment manager to, and has investment discretion over, the securities held by the NW Funds. NightWatch Capital Management, LLC (the "General Partner") serves as the general partner of, and has investment discretion over, the securities held by the NW Funds.

4. John Nemelka is the managing member of the managing member of the managing member of the managing member of the managing member of the General Partner. Each managing member and the General Partner understand that by reason of Rule 16a-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") each may be deemed to be the beneficial owners of the Common Stock of Kana Software, Inc. held by the NW Funds, although each disclaims beneficial ownership of such Common Stock except to the extent of any indirect pecuniary interest (within the meaning of Rule 16a-1 of the Exchange Act) therein in an indeterminate portion of the Common Stock beneficially owned by the NW Funds.

Remarks:

	Paul V. Burgon	10/09/2006
	** Signature of Reporting Person	Date
Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 4 (b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.
Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB Number.