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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

OR

Commission File Number 000-27241

KEYNOTE SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code:

(650) 403-2400

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

None

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

Common Stock, $0.001 Par Value Per Share, and the Associated Stock Purchase Rights

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.    x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES x    NO ¨

As of March 31, 2003, the aggregate market value of voting stock held by non-affiliates of the Registrant was $189 million.

The number of shares of the Registrant’s common stock outstanding as of December 19, 2003 was 19,241,459.

Documents incorporated by reference: Part III incorporates information by reference to portions of the Registrant’s proxy statement for its 2004 annual meeting of stockholders.

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KEYNOTE SYSTEMS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003

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PART I

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FORWARD-LOOKING STATEMENTS

Except for historical information, this annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our anticipated revenue, margins, costs and expenses. These forward-looking statements include, among others, statements including the words “expect,” “anticipate,” “intend,” “believe” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to these differences include, but are not limited to, those discussed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Impact Future Operating Results” and elsewhere in this report. You should carefully review the risks described in other documents we file from time to time with the Securities and Exchange Commission, including the quarterly reports on Form 10-Q and current reports on Form 8-K that we may file in fiscal 2004. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this annual report on Form 10-K. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

The trademarks of Keynote Systems, Inc. in the United States and other countries include Keynote^®, Perspective^®, the Internet Performance Authority^®, MyKeynote^™ and all related trademarks, trade names, logos, characters, design and trade dress are trademarks or registered trademarks of Keynote Systems, Inc. in the United States and other countries and may not be used without written permission.

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PART I

Item 1.    Business.

Overview

Keynote offers web performance measurement and management services that enable corporate enterprises to monitor, benchmark, test and tune, diagnose and optimize their e-business systems both inside and outside the firewall. Keynote’s services provide enterprise customers with Total Performance Management solutions enabling them to increase return on investment, save money and efficiently link information technological resources to e-business goals. Total Performance Management includes a broad portfolio of cost-effective measurement, monitoring, performance management, load testing, content quality testing and usability testing services. Keynote’s goal is to empower customers to deliver an optimal experience to end users and to gain competitive advantage, while helping them reduce unnecessary capital expenditures and leverage enterprise management software they already own.

The foundation of our web performance measurement and management services is an extensive network of strategically located measurement computers, running our proprietary software, connected to the major Internet backbones in over 50 cities worldwide, plus a sophisticated operations center for collecting, analyzing and disseminating Web site response time and availability data. Keynote’s infrastructure, together with our services, and in some cases, with Keynote-managed appliances placed within a customer’s infrastructure, provide customers the ability to access their results in real-time over the Internet through any standard web browser.

Our web performance measurement and management services help customers mange their web performance 24 hours a day, 7 days a week from an end-user perspective. We had over 1,750 measurement computers deployed in over 50 cities and in 120 locations as of September 30, 2003. As of September 30, 2003, our measurement computers measured the performance of 7,429 universal resource locators, or URLs, 7,741 Red Alert devices connected to the Internet, and 17,100 URLs through our NetMechanic service.

We offer our web performance measurement services and management solution services primarily on a subscription basis. Subscription fees vary based on the type of service selected, the number of URLs and transactions measured, the number of measurement locations, the number of devices monitored, the frequency of the measurements and the additional features ordered. We offer consulting and support configured around our portfolio of services on an incident and per engagement basis. Consulting and support services revenue has represented 10% or less of total revenue in all periods to date.

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Keynote Services

We currently offer the following services:

Web Performance Measurement Services

Keynote’s web performance measurement solutions consist of subscription-based benchmarking, measurement and monitoring services.

Keynote’s measurement services monitor and diagnose page download performance of public and secure Web pages, transaction performance (defined as measuring the response time and availability of each page of a multi-step transaction) across T-1 and T-3 connections, broadband connections (DSL and cable-modem) and dial-up connections from over 50 metropolitan areas worldwide. Our wireless and streaming services measure the quality of audio, video and wireless quality of service delivered across the Internet. Enterprises rely on Keynote’s measurement and monitoring services for accurate and timely information to compare and trend total performance and enforce service level agreements and to detect, diagnose and repair performance problems in their e-business infrastructure.

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Keynote Web Site Perspective is a completely outsourced, subscription-based service that measures Web site performance from multiple points on the Internet, providing insight into the end-user experience. We offer two editions of this service:

Keynote Transaction Perspective uses the Microsoft Internet Explorer browser to take the measurements from Keynote’s worldwide infrastructure to deliver full network-level and user-level statistics and error messages for each element of each page in the transaction. It enables transaction performance problems to be quickly and accurately identified, diagnosed and repaired, ensuring an optimal experience for end-users.

Keynote Red Alert is a real-time Internet monitoring service that tests devices connected to the Internet every five minutes. Red Alert tests the availability of any Internet server or other Transmission Control Protocol-enabled Internet devices including web servers, secure web servers, domain name servers, mail servers, File Transfer Protocol servers and network gateways.

Keynote Streaming Perspective measures, compares and assures the performance of audio and video streams, diagnosing performance problems before they impact the end-user. Streaming Perspective supports the latest media players, including Real Media and Windows Media.

Keynote NetMechanic uses automated tools that test site integrity, optimize page visualization, and improve search engine rankings.

Keynote Red Alert Performance Tracker (RAPT) is a cost effective, self-service performance monitoring solution. RAPT provides the tools to understand web site performance, including alarms on both performance and availability. RAPT has the ability to monitor transaction performance up to every 20 seconds and provides alerts when problems do occur. It is designed to meet the demanding needs of operations staff monitoring in a wide variety of Web transactions from multiple global geographies, in real time.

Web Performance Management Services

Keynote’s performance management services include Enterprise Solutions such as Application Perspective, Performance Scoreboard, Enterprise Adapters, Private Agents, Data Pulse, Network Perspective and Traffic Perspective. Keynote’s performance management services also include testing and tuning services such as LoadPro, PerformanceTune, Test Perspective, Wireless Perspective, WebEffective, and WebIntegrity^™.

With Keynote’s Web performance management services, enterprises can actively test and manage the total performance of their e-business systems. Using Keynote’s services and appliances, customers can leverage their existing Information Technology (IT) investments in systems management software to monitor, identify, diagnose and repair e-business performance problems end-to-end.

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Keynote Professional Services.    Our professional services organization provides engagement-based and ongoing customer services to our customers. When certain data is not available from our standard measurement services, our professional services organization can create and deploy agents to gather the specific performance data a customer wants. Some of the services our professional services organization can provide include:

Keynote Private Agents enable enterprises to actively measure and manage the performance of their internal networks, system architecture, and other local processes and Web-based applications, as well as Web performance from unique locations not already covered by Keynote’s worldwide infrastructure of computers using cost-effective and easy-to-deploy appliances.

Keynote Enterprise Adapters are flexible solutions that integrate with any Simple Network Management Protocol (SNMP) capable application, such as CA Unicenter, HP Openview and IBM Tivoli, and securely incorporate performance alarms on external or internal Web-based events. Keynote SNMP Adapter requires no changes to a company’s security policies; security is assured through a standard outbound Hyper Text Transfer Protocol over Secure Socket Layer connection from inside the network.

Keynote LoadPro models actual user behavior on a Web site and then scales that load up across multiple geographies enabling e-businesses to predict business and performance outcomes.

Keynote Data Pulse is a highly flexible Extensible Markup Language (XML)-based, real-time data feed service that simplifies Web application performance management for operations departments, giving the network operations center immediate access to actionable data in order to identify and troubleshoot problems. Customers can customize polling frequencies as frequently as every minute.

Keynote Test Perspective is an easy-to-use, cost-effective and self-service solution for IT personnel that need to initiate on-demand load tests of e-business applications from one or multiple geographic locations. IT personnel now have the ability to run on-demand load tests and diagnostic tests and receive immediate feedback on modifications made to the Web site or any other aspect of the infrastructure to ensure that overall performance has not degraded.

Keynote Wireless Perspective measures the availability and performance of wireless data services from actual end user devices enabling carriers and enterprises to improve the quality of wireless data services. The latest version (3.0) supports camera phones, push-to-talk and multimedia message services.

Keynote Diagnostic Services provide advanced diagnostic assistance and service capabilities across all of Keynote’s performance measurement and management services.

Keynote Traffic Perspective combines passive monitoring of real-time end user traffic from Keynote partners with data collected by Keynote’s measurement services to create a unique solution to quantify, isolate, diagnose and resolve Web performance issues.

Keynote WebEffective is an user experience testing service that provides an understanding of how real users are interacting with key business processes and why users complete transactions or why they leave a site or abandon a transaction.

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Keynote WebIntegrity provides a self-service, on-demand quality testing solution that allows companies to find content related problems quickly after each site or content update. Companies can now manage and enforce content quality standards in their organizations. WebIntegrity tests link integrity, diagnoses and repairs Hypertext Markup Language (HTML) code problems, as well as tests for compliance with the latest HTML standards.

Keynote Application Perspective is a monitoring and root cause diagnostics solution for e-business applications. Application Perspective offers e-business application performance management solutions that previously have been delivered with more complex software implementations.

Keynote Performance Scoreboard is a customized portal for the visual management of service level objectives (SLOs) for multi-property, multi-location e-businesses. Performance Scoreboard is designed for customers with complex e-business environments and displays the overall health of a company’s multiple data centers, properties, Virtual Private Networks (VPN) and suppliers. Keynote Performance Scoreboard enables customers to track SLOs, quickly identify application and network latency issues and analyze trends and infrastructure details using on-demand drill-down diagnostic tools. Performance Scoreboard can be used with Keynote Application Perspective, Keynote Private Agents and other Keynote measurements.

Keynote PerformanceTune is an outsourced tuning service that combines Keynote’s load testing infrastructure with detailed back-end monitoring metrics to isolate and repair performance bottlenecks.

Keynote Test Perspective for Siebel 7 is a load testing service that utilizes Keynote’s load-generation infrastructure to help companies validate the performance of their entire Siebel 7 application infrastructure. Test Perspective for Siebel 7 allows enterprise customers to cost-effectively optimize the performance and scalability of Siebel eBusiness Applications using Keynote’s services-based approach, rather than more costly and complex load testing software.

Keynote Network Perspective is targeted at network engineers to ensure optimal network and Service Level Agreement performance. Network Perspective leverages Keynote’s worldwide network of measurement computers placed on the Internet, or anywhere within a company’s private network, to measure Internet transit and Web site performance from many different Internet Service Providers and geographical locations. Its performance measurement infrastructure collects over 500 million Internet measurements a day and delivers Internet diagnostic data, down to the router and load balancer level. The service helps customers quickly identify and resolve network performance problems (whether on the Internet or on a company’s VPN) that are affecting critical Web-based applications.

Technology and Infrastructure

Our performance measurement infrastructure consists of three key components: measurement and data collection infrastructure, our operations and data center, and reporting and analysis tools.

Measurement and Data Collection Infrastructure

Our measurement computers are Windows-based computers that run Keynote proprietary software to replicate the experience of a user accessing web sites through a standard web browser. We designed our measurement-computer software to perform thousands of download measurements concurrently without distorting or affecting the integrity of any single measurement. The measurement computers are colocated at the data center facilities of major telecommunication and internet access providers that are selected to be statistically representative of Internet users. At some locations, we employ multiple Internet connections and install equipment racks that can accommodate multiple measurement computers. The hosting arrangements for our

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measurement computers typically have terms ranging from three months to one year. We typically pay a small set-up fee and pay monthly fees to continue to locate the measurement computers at these locations. We also pay additional monthly fees for communications lines.

These measurement computers access a web site to download web pages and execute multi-page transactions, while taking measurements of every component in the process. The computers take measurements continually throughout the day, at intervals as short as three minutes, depending on the customer’s requirements and subscription service level.

As of September 30, 2003, we had deployed more than 1,750 measurement computers in 63 domestic and 57 international telecommunication and internet access provider locations, with most locations having multiple measurement computers in order to provide different types of measurement services or to accommodate changes in measurement volume. We continually upgrade and balance our network capacity to meet the needs of our customers.

Operations and Database Centers

Our operations centers, located in San Mateo, California, and Plano, Texas, are designed to be scalable to support large numbers of measurement computers and to store, analyze and manage large amounts of data from these computers. Our measurement computers receive instructions from, and return collected data to, our operations center. The data are stored in large databases that incorporate a proprietary transaction-processing system that we designed to be efficient in storing and delivering measurement data with fast response times. We also employ proprietary, high-performance application server computers that manage the collection of measurement data, the insertion of the data into our databases and the dissemination of this data to our customers in a variety of forms and delivery methods.

Reporting and Analysis Tools

We offer the following tools for reporting and analysis of performance measurement data:

Customers

For the year ended September 30, 2003, no one customer accounted for more than 10% of our total revenue. As of September 30, 2003, we provided services to approximately 2,200 companies including over half of the Fortune 100 companies.

Our 10 largest customers, based on revenue for the fiscal year ended September 30, 2003, were American Express, AT&T Wireless, Cable & Wireless, Hewlett-Packard, IBM, Intermedia Communications/Digex,

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Microsoft, Overture Services (acquired by Yahoo! Inc. in October 2003), SBC Communications and Sprint. These customers generated approximately 30% of our revenue for the year ended September 30, 2003.

Sales, Marketing and Customer Support

Sales

We sell our services through our field sales and telesales organization. Our field sales teams consist of direct sales representatives and sales engineers, located in 10 metropolitan areas across the United States, and concentrate on our web performance management products. In addition to the field sales teams across the country, we have telesales personnel located in Plano, Texas. These telesales personnel focus primarily on selling our web performance measurement services and also provide telephone and email sales support and customer service to our enterprise customers. We believe that through the combined use of our enterprise sales teams and telesales personnel, we are able to efficiently focus our sales resources on interfacing with a variety of customers, which is designed to ensure customer satisfaction. We also market and sell some of our services through our self-service web site, where customers can sign up and try, purchase, and use our services.

In addition, domestically, we distribute our services through web-hosting and Internet service providers such as IBM Global Services and EDS, who manage e-business web sites for other companies. These companies sell or bundle our services to their customer base as a value-added service and as a management tool for their customers’ web sites. We also sell to content distribution providers, such as Akamai and Cable & Wireless, who use our services as a pre-sales tool for their potential customers or in service level agreements with their existing customers. We also market our services through several other technology companies, such as VeriSign, on a “lead referred” basis. Internationally, we use both direct and indirect sales approaches in the United Kingdom and Germany and sell indirectly through reseller partners throughout the rest of Europe, the Middle East, Africa and Asia.

Marketing

We maintain an active marketing program designed to demonstrate to Fortune 1000 companies the breadth and depth of our web performance measurement and management services. We have established and continue to strengthen our brand through multiple means including the public availability on our Web site of top level details for our web performance indices (both page download and transaction), and through our regular reporting and commentary to the media regarding Internet performance-related events. We are actively expanding our services to provide our customers with “total performance management” which is designed to encompass all aspects of user experience as it relates to e-business.

Our marketing programs include advertising, Internet marketing, trade events, public relations, and our annual Global Internet Performance Conferences. Our Global Internet Performance Conference event, held in New York, provides an opportunity for us and our partners to brief chief information officers, chief technology officers, information technology executives and network administrators on emerging solutions, new methodologies and best practices to help customers optimize e-business performance. We use these conferences to update customers on our latest performance measurement and management services, and to deliver a broader understanding of the role our services can play in optimizing e-business. We also sponsor a series of regional Web Performance Briefings to give executives in vertical markets insight into our “total performance management” strategy.

An important element of our marketing strategy is our industry benchmark and transaction indices that evaluate and rank the relative performance of various web sites. Our indices include:

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Customer Support

We believe that a high quality of customer support is important to our success. We believe our customers view our services as a way to improve their ability to provide a high quality of service in their e-business. Therefore, we provide customer support by email and telephone. We develop and expand our customer support services based on feedback received from our existing customers and formal customer satisfaction surveys conducted by an independent third party.

Basic support for all our products is available during the business day. Advanced support is available for a fee through our Keynote Diagnostic Services, for customers who want analytical or diagnostic support, or who require access 24 hours per day, 7 days per week to Keynote expertise to assist them with their questions.

Research and Development

The Internet is characterized by rapid technological developments, frequent new application or service introductions and evolving industry standards. The ongoing evolution of the Internet requires us to continually improve the functionality, features and reliability of our web performance measurement and web performance management services, particularly in response to competing offerings. Therefore, we believe that our future success will depend in large part on our ability to maintain and enhance our current services and to develop or acquire new services and technologies that achieve market acceptance. The success of service introductions depends on several factors, including properly defining the scope of the new services and timely completion, introduction and market acceptance of our new services. If new Internet, networking or telecommunication technologies or standards are widely adopted or if other technological changes occur, we may need to expend significant resources to adapt our services.

Our research and development expenses were $7.4 million for the fiscal year ended September 30, 2003, $8.9 million for the fiscal year ended September 30, 2002, and $7.3 million for the fiscal year ended September 30, 2001.

Competition

The market for web performance measurement and management services is rapidly evolving. Our competitors vary in size and in the scope and breadth of the products and services that they offer. We face competition from companies that offer software and services with features similar to our services such as Mercury Interactive, Gomez Advisors, Segue Software, WatchFire, and a variety of small companies that offer

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a combination of testing, market research capabilities and data. While we believe these services are not as comprehensive as ours, customers could still choose to use these services or these companies could enhance their services to offer all of the features we offer. As we expand the scope of our products and services, we expect to encounter many additional market-specific competitors.

We could also face competition from other companies, which currently do not offer services similar to our services, but offer software or services related to web performance measurement and web performance management, such as WebCriteria, a division of Coremetrics, Inc., and INS INSoft Division, a unit of Lucent Technologies, and free services that measure web site availability. In addition, companies that sell systems management software, such as BMC Software, CompuWare, CA-Unicenter, HP-Openview, Quest Software, NetIQ, Veritas’ Precise Software, and IBM’s Tivoli Unit, with some of whom we have strategic relationships, could choose to offer services similar to ours.

In the future, we intend to expand our service offerings and continue to measure and manage the performance of emerging technologies such as Internet telephony, wireless devices, and wireless fidelity, or WI-FI networks and, as a result, could face competition from other companies. Some of our existing and future competitors have or may have longer operating histories, larger customer bases, greater brand recognition in similar businesses, and significantly greater financial, marketing, technical and other resources. In addition, some of our competitors may be able to devote greater resources to marketing and promotional campaigns, to adopt more aggressive pricing policies, and to devote substantially more resources to technology and systems development.

Increased competition may result in price reductions, increased costs of providing our services and loss of market share, any of which could seriously harm our business. We may not be able to compete successfully against our current and future competitors.

Intellectual Property

We are a technology company whose success depends on developing, acquiring and protecting our intellectual property assets.

Intellectual Property Assets

Our principal intellectual property assets consist of our trademarks, our trade names, our logos, our characters, our design, our trade dress, our service marks, our patents, our patent applications and the proprietary software we developed or acquired to provide our services. Trademarks are important to our business because they represent our brand name and we use them in our marketing and promotional activities as well as in the delivery of our services. Our trademarks include our registered trademark Keynote, Perspective, and The Internet Performance Authority. Our trademark on Keynote is pending registration outside of the United States. We have other trademarks that are currently pending registration with the U.S. Patent and Trademark Office or have not been registered.

We currently have two issued U.S. patent and no foreign patents. We have six pending U.S. patent applications and no pending foreign patent applications related to our web performance management and web performance testing services. It is possible that no patents will be issued from our currently pending patent applications and that our issued patents or potential future patents may be found invalid or unenforceable, or otherwise be successfully challenged. It is also possible that any patent issued to us may not provide us with any competitive advantages, that we may not develop future proprietary products or technologies that are can be patented, and that the patents of others may seriously limit our ability to do business. In this regard, we have not performed any comprehensive analysis of patents of others that may limit our ability to do business.

Our proprietary software consists of the software we developed or acquired that is an integral part of our testing and performance management services as well as that which collects, stores, and delivers our measurement data to customers. We have also developed software that we use to provision and process customer orders and billings.

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Protection of Our Intellectual Property

The intellectual property we use in our business is important to us. Despite our efforts, we may be unable to prevent others from infringing upon or misappropriating our intellectual property, which could harm our business.

Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet-related industries are uncertain and still evolving, and the future viability or value of any of our intellectual property rights is uncertain. Effective trademark, copyright and trade secret protection may not be available in every country in which our products are distributed or made available. Furthermore, our competitors may independently develop similar technology that substantially limits the value of our intellectual property, or they may design around patents issued to us.

The use of our services by many of our customers is governed by a web-based subscription agreement, but for some of our larger customers, additional terms and conditions may be added by means of a formal, written contract. Each time customers use our services, they “click” on a web page to agree to terms and conditions that are posted on our web site, and our relationship with these customers is then governed by these terms and conditions and any written agreements that may exist. There is a possibility that a court, arbiter or regulatory body could deem this type of agreement to be invalid or determine that the terms and conditions governing the agreement do not fully protect our intellectual property rights. If that were to occur, our business could be harmed.

Although we are not currently engaged in any intellectual property litigation, we may, in the future, need to initiate a lawsuit to enforce our intellectual property rights and to protect our patents, trademarks and copyrights. Any litigation could result in substantial costs and diversion of resources and could seriously harm our business. To date, we have not been notified that our technologies infringe the proprietary rights of anyone. We cannot assure you that others will not claim that we have infringed proprietary rights with respect to past, current or future technologies. We expect that we could become subject to intellectual property infringement claims as the number of our competitors grows and our services overlap with competitive offerings. These claims, even if not meritorious, could be expensive and divert management’s attention from operating our company. If we become liable for infringing the intellectual property rights of others, we would be required to pay a substantial damage award and to develop non-infringing technology, obtain a license or cease selling the services that contain the infringing intellectual property. We may be unable to develop non-infringing technology or to obtain a license on commercially reasonable terms, if at all.

Licensed Technology

We license certain statistical, graphical and database technologies from third parties. We cannot assure you that these technology licenses will not infringe the proprietary rights of others or will continue to be available to us on commercially reasonable terms, if at all. The loss of this technology could require us to obtain substitute technology of lower quality or performance standards or at greater cost. If we do not obtain or develop substitute technology, we could be unable to offer all of the features or functionality that we desire to include in our services.

Employees

As of September 30, 2003, we had a total of 158 employees, of which 153 were based in the United States, and 5 were based internationally. None of our employees are represented by a collective bargaining agreement nor have we experienced any work stoppage. We believe that our relationships with our employees are good. Our future success depends on our ability to attract, motivate and retain our key personnel. We may be unable to retain our key employees, including our management team, and experienced engineers, or to attract, assimilate or retain other highly qualified employees. Although a number of technology companies have implemented

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workforce reductions, there remains substantial competition for highly skilled employees with experience in the Internet industry. None of our key employees are bound by agreements that could prevent them from terminating their employment at any time.

Item 2.    Properties.

As of September 30, 2003, our facilities primarily consisted of our headquarters building in San Mateo, California, a 188,000 square foot building, which we own. We currently occupy approximately 56,000 square feet of this facility, which is our principal sales/marketing, product development and administrative location and contains our operations personnel and data center. We believe that our facilities are adequate for our current and future needs. We also have a five-year lease, expiring in December 2005, for approximately 8,000 square feet of office space in Plano, Texas, for our Red Alert, NetMechanic, inside sales and support and operations. We also have a month to month lease for 1,615 square feet of office space in Seattle, Washington, for our wireless operations and a month-to-month lease for 1,500 square feet of office space in West Toronto, Ontario. See Note 12 of the Notes to Consolidated Financial Statements for additional information regarding our lease agreements.

Item 3.    Legal Proceedings.

Beginning on August 16, 2001, a number of class action lawsuits were filed in the United States District Court for the Southern District of New York against us, certain of our officers, and the underwriters of our initial public offering. These lawsuits were essentially identical, and were brought on behalf of those who purchased our securities between September 24, 1999 and August 19, 2001. These complaints alleged generally that the underwriters in certain initial public offerings, including ours, allocated shares in those initial public offerings in unfair or unlawful ways, such as requiring the purchaser to agree to buy in the aftermarket at a higher price or to buy shares in other companies with higher than normal commissions. The complaint also alleged that we had a duty to disclose the activities of the underwriters in the registration statement relating to our initial public offering. In June 2003, the plaintiffs’ counsel and the issuer defendants’ counsel reached a settlement agreement whereby the issuers and individual defendants were dismissed from the case, without any payments by us. The settlement awaits approval by the Court.

We are subject to legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

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

Not applicable.

Item 4A.    Executive Officers.

The following table presents information regarding our executive officers as of December 20, 2003:

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Umang Gupta has served as one of our directors since September 1997 and as our chief executive officer and chairman of the board of directors since December 1997. Previously, he was a private investor and an advisor to high-technology companies and the founder and chairman of the board and chief executive officer of Centura Software Corporation. He previously held various positions with Oracle Corporation and IBM. Mr. Gupta holds a B.S. degree in chemical engineering from the Indian Institute of Technology, Kanpur, India, and an M.B.A. degree from Kent State University.

Peter Maloney has served as our chief financial officer since October 2003 and as our vice president of finance since January 2002. Mr. Maloney joined Keynote in October 2001 as Vice President and Controller and served in that position until January 2002. From May 1998 to September 2001, Mr. Maloney served at Adaptive Broadband Corporation, a fixed wireless broadband company, in senior management positions including Senior Vice President of Finance and Senior Vice President of Corporate Development. Prior to Adaptive, he served at Republic Industries, Inc. , a diversified consumer products and services company, in senior financial positions including Vice President of Investor Relations. Prior to Republic, Mr. Maloney served in financial management positions at Dole Food Company and Arthur Andersen LLP. Mr. Maloney holds an M.B.A. degree in corporate finance from the University of Southern California and a B.B.A. in economics from Temple University.

Donald Aoki has served as our vice president of engineering since May 1997. From December 1994 to May 1997, he served as a business unit general manager of Aspect Telecommunications, a supplier of customer relational management solutions. Mr. Aoki holds a B.S. degree in computer science from the University of Southern California and a M.S. degree in electrical engineering and computer science from the Massachusetts Institute of Technology.

Lloyd Taylor has served as our vice president of operations since January 1999. From January 1997 to December 1998, he served as vice president of technical operations of the Web Site Management Group of Digex, Inc., a web site management services company. Mr. Taylor holds an M.S.E.E. degree in electrical engineering from Johns Hopkins University and a B.S.E.E. degree in electrical engineering and a B.S.C.S. degree in computer science, each from Washington University.

Richard Rudolph has served as our vice president of worldwide sale since December 2001. From February 2001 to December 2001, he served as senior vice president of global sales and business development for webHancer Corporation, a provider of web performance measurement and analysis. From April 1999 to January 2001, he served as vice president of sales at WebTrends, a web site performance measurement and analysis company. From June 1997 to April 1999, he held sales positions at Extensis Corporation, a provider of products and services for electronic publishing. Mr. Rudolph holds a B.S. degree in economics from Oregon State University.

Arnold Waldstein has served as our vice president of marketing and business development since April 2002. From May 1999 to March 2002, Mr. Waldstein served as vice president of marketing and strategic alliances for Moai Technologies, an online strategic sourcing company. From March 1998 to May 1999, he founded and served as chief executive officer of Waldstein Consulting, a boutique consulting firm. From February 1996 to February 1998, he served as vice president of marketing and business development at Electric Communities, an online services company. Mr. Waldstein holds a B.A. degree in English from Ohio University.

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PART II

Item 5.    Market for Registrant’s Common Stock and Related Stockholder Matters.

Price Range of Common Stock

Our common stock has traded on the Nasdaq National Market under the symbol “KEYN” since our initial public offering on September 24, 1999. Prior to this time, there was no public market for our common stock. On December 19, 2003, we had 19,241,459 shares of our common stock outstanding held by 106 stockholders of record. Because many brokers and other institutions hold our stock on behalf of stockholders, we believe the total number of beneficial holders is greater than that represented by these record holders. The following table presents the high and low sales price per share of our common stock for the period indicated, as reported on the Nasdaq National Market:

The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future. In