##### 





UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
   FORM 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the quarterly period ended
    March 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.    Commission file number
    000-50784
   Blackboard Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
   Delaware

52-2081178(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)1899 L Street, N.W.
    Washington D.C.(Address of Principal
    Executive Offices)

20036(Zip Code)    Registrants Telephone Number, Including Area Code:
 (202) 463-4860
   þ o
  12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
   Class

Outstanding at April 30, 2008Common Stock, $0.01 par value

30,931,905




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##### 





Blackboard
    Inc.
    Quarterly Report on
    Form 10-Q
    For the Quarter Ended March 31, 2008
    INDEX
  PART I. FINANCIAL INFORMATIONItem 1.


Consolidated Financial StatementsConsolidated Balance Sheets as of December 31, 2007 and
    March 31, 2008 (unaudited)


1Unaudited Consolidated Statements of Operations for the Three
    Months Ended March 31, 2007 and 2008


2Unaudited Consolidated Statements of Cash Flows for the Three
    Months Ended March 31, 2007 and 2008


3Notes to Unaudited Consolidated Financial Statements


4Item 2.


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


17Item 3.


Quantitative and Qualitative Disclosures About Market Risk


27Item 4.


Controls and Procedures


28PART II. OTHER INFORMATIONItem 1A.


Risk Factors


29Item 6.


Exhibits


39Signature


40    Throughout this Quarterly Report on
    Form 10-Q,
    the terms we, us, our and
    Blackboard refer to Blackboard Inc. and its
    subsidiaries.
 ii




---



##### 



PART I 
    FINANCIAL INFORMATION  Item 1.
    Consolidated
    Financial Statements  BLACKBOARD
    INC.
 CONSOLIDATED
    BALANCE SHEETS
    (In thousands, except share and per share data)  December 31,


March 31,2007


2008(Unaudited)Current assets:Cash and cash equivalents

$
206,558


$
62,366Accounts receivable, net of allowance for doubtful accounts of
    $765 and $795, respectively


52,846



53,097Inventories


2,089



1,855Prepaid expenses and other current assets


5,255



7,362Deferred tax asset, current portion


6,549



6,965Deferred cost of revenues, current portion


6,793



5,682Total current assets


280,090



137,327Deferred tax asset, noncurrent portion


34,154



14,667Deferred cost of revenues, noncurrent portion


84



238Restricted cash


4,015



4,015Property and equipment, net


18,584



28,315Goodwill


117,502



264,536Intangible assets, net


50,847



104,763Total assets

$
505,276


$
553,861Current liabilities:Accounts payable

$
3,747


$
7,554Accrued expenses


24,182



23,634Deferred rent, current portion


160



415Deferred revenues, current portion


126,600



114,946Total current liabilities


154,689



146,549Convertible senior notes, net of debt discount of $3,481 and
    $3,022, respectively


161,519



161,978Deferred rent, noncurrent portion


1,469



2,683Deferred revenues, noncurrent portion


2,925



2,474Total liabilities


320,602



313,684Commitments and contingenciesStockholders equity:Preferred stock, $0.01 par value; 5,000,000 shares
    authorized, and no shares issued or outstanding






Common stock, $0.01 par value; 200,000,000 shares
    authorized; 29,196,807 and 30,909,612 shares issued and
    outstanding, respectively


292



309Additional paid-in capital


263,582



322,361Accumulated deficit


(79,200
)


(82,493
)Total stockholders equity


184,674



240,177Total liabilities and stockholders equity

$
505,276


$
553,861    1




---



##### 



BLACKBOARD
    INC.
 UNAUDITED
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except share and per share data)  Three Months EndedMarch 31,2007


2008Revenues:Product

$
49,981


$
63,109Professional services


5,299



5,366Total revenues


55,280



68,475Operating expenses:Cost of product revenues, excludes $2,825 and $4,078 in
    amortization of acquired technology included in amortization of
    intangibles resulting from acquisitions shown below,
    respectively(1)


11,697



15,970Cost of professional services revenues(1)


3,764



4,948Research and development(1)


6,953



9,733Sales and marketing(1)


14,546



20,859General and administrative(1)


9,317



12,753Amortization of intangibles resulting from acquisitions


5,399



8,679Total operating expenses


51,676



72,942Income (loss) from operations


3,604



(4,467
)Other income (expense), net:Interest expense


(758
)


(1,830
)Interest income


405



890Other income


73



310Income (loss) before (provision) benefit for income taxes


3,324



(5,097
)(Provision) benefit for income taxes


(1,380
)


1,804Net income (loss)

$
1,944


$
(3,293
)Net income (loss) per common share:Basic

$
0.07


$
(0.11
)Diluted

$
0.07


$
(0.11
)Weighted average number of common shares:Basic


28,351,872



30,247,568Diluted


29,428,043



30,247,568(1) Includes the following amounts related to stock-based
    compensation:Cost of product revenues

$
129


$
176Cost of professional services revenues


116



163Research and development


117



162Sales and marketing


491



1,416General and administrative


1,359



1,763    2




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##### 



BLACKBOARD
    INC.
 UNAUDITED
    CONSOLIDATED STATEMENTS OF CASH FLOWS  Three MonthsEnded March 31,2007


2008(In thousands)Cash flows from operating activitiesNet income (loss)

$
1,944


$
(3,293
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Deferred tax provision (benefit)


883



(1,671
)Excess tax benefit from stock-based compensation


(1,568
)


(563
)Amortization of debt discount


211



459Depreciation and amortization


2,512



3,316Amortization of intangibles resulting from acquisitions


5,399



8,679Change in allowance for doubtful accounts


43



30Noncash stock-based compensation


2,212



3,680Changes in operating assets and liabilities, net of effect of
    acquisitions:Accounts receivable


11,709



7,842Inventories


317



234Prepaid expenses and other current assets


(85
)


(1,033
)Deferred cost of revenues


1,234



957Accounts payable


1,830



457Accrued expenses


(4,856
)


(4,469
)Deferred rent


(106
)


1,469Deferred revenues


(20,788
)


(22,149
)Net cash provided by (used in) operating activities


891



(6,055
)Cash flows from investing activitiesAcquisitions, net of cash acquired






(131,923
)Purchase of property and equipment


(2,417
)


(7,944
)Payments for patent enforcement costs


(1,233
)


(635
)Purchase of intangible assets


(1,500
)


Net cash used in investing activities


(5,150
)


(140,502
)Cash flows from financing activitiesPayments on term loan


(5,000
)


Payments on letters of credit


(338
)


Excess tax benefits from stock-based compensation


1,568



563Proceeds from exercise of stock options


3,134



1,802Net cash (used in) provided by financing activities


(636
)


2,365Net decrease in cash and cash equivalents


(4,895
)


(144,192
)Cash and cash equivalents at beginning of period


30,776



206,558Cash and cash equivalents at end of period

$
25,881


$
62,366    3




---



##### 



BLACKBOARD
    INC.
 NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2007 and
    2008



In these Notes to Unaudited Consolidated Financial
    Statements, the terms the Company and
    Blackboard refer to Blackboard Inc. and its
    subsidiaries. 1.
    Nature of
    Business  Blackboard Learning
    Systemtm, tm tm tm Blackboard Portfolio
    Systemtm Blackboard Transaction
    Systemtm, Blackboard
    Onetm, and Blackboard
    Connecttm
  2.
    Basis of
    Presentation  Form 10-Q Regulation S-X.
  Form 10-K
  Principles
    of Consolidation
    Foreign
    Currency Translation
    Use of
    Estimates
    Fair
    Value Measurements
  Fair Value Measurements
 4




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##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
            Income
    Taxes
      Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109 Accounting for
    Income Taxes Accounting for
    Contingencies.
 5




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##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
  Revenue
    Recognition and Deferred Revenue
  97-2, Software Revenue Recognition, SOP 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, with Respect to Certain
    Transactions.
      00-3, Application of AICPA
    SOP 97-2
    to Arrangements That Include the Right to Use Software Stored on
    Another Entitys Hardware. set-up
  SOP 97-2. time-and-materials
  when-and-if-available SOP 97-2.
 6




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##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
  Cost
    of Revenues and Deferred Cost of Revenues
      Basic
    and Diluted Net Income (Loss) per Common Share
      Three Months EndedMarch 31,2007


2008(Unaudited)(In thousands, except share and per share amounts)Net income (loss)

$
1,944


$
(3,293
)Weighted average shares outstanding, basic


28,351,872



30,247,568Dilutive effect of:Stock options related to the purchase of common stock


1,076,171



Weighted average shares outstanding, diluted


29,428,043



30,247,568Basic net (loss) income per common share

$
0.07


$
(0.11
)Diluted net (loss) income per common share

$
0.07


$
(0.11
)   Stock-Based
    Compensation
  Share-Based Payment
 7




---



##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
  Comprehensive
    Net Income (Loss)
    Recent
    Accounting Pronouncements
  Business
    Combinations.
  No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2). FSP 157-2
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  3.  The
    NTI Group, Inc. Merger
      Business Combinations
 8




---



##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
    Preliminary
    Purchase Price Allocation
    Cash and cash equivalents

$
2,480Accounts receivable


8,123Prepaid expenses and other current assets


1,143Property and equipment


2,304Accounts payable


(650
)Other accrued liabilities


(2,142
)Deferred tax liabilities, net


(16,806
)Deferred revenue


(10,045
)Net tangible liabilities to be acquired


(15,593
)Definite-lived intangible assets acquired


60,325Goodwill


142,998Total estimated purchase price

$
187,730        9




---



##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
        Goodwill and Other Intangible
    Assets,
    Deferred
    Revenue
  build-up build-up
  Pro
    Forma Financial Information
   10




---



##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
      Three Months EndedMarch 31,2007


2008(Unaudited)(In thousands, except per share data)Total revenues

$
61,511


$
71,918Net loss

$
(1,878
)

$
(4,444
)Basic net loss per share

$
(0.06
)

$
(0.14
)Diluted net loss per share

$
(0.06
)

$
(0.14
)   4.
    Stock-Based
    Compensation  Stock
    Incentive Plans
     11




---



##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
  Stock
    Options
    Number of


Weighted Average


AggregateShares


Price/Share


Intrinsic ValueExercisable at December 31, 2007


1,825,306


$
16.92Outstanding at December 31, 2007


4,245,737


$
25.21Granted


775,750


$
29.79Exercised


(125,649
)

$
14.15


$
2,215Canceled


(54,801
)

$
29.72Outstanding at March 31, 2008


4,841,037


$
26.18


$
37,882Exercisable at March 31, 2008


2,016,219


$
18.79


$
29,307     Three Months Ended March 31,2007


2008Dividend yield


0
%


0
%Expected volatility


44.0
%


39.6
%Risk-free interest rate


4.7
%


2.8
%Expected life of options


5.1 years



4.9 yearsForfeiture rate


15
%


7.5
%   Dividend yield
  Expected volatility
  Risk-free interest rate
  Expected life of the options Share-Based Payment.
 12




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##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
    Forfeiture rate
      Restricted
    Stock
    Number of


Weighted Average


AggregateShares


Price/Share


Intrinsic ValueOutstanding and exercisable at December 31, 2007


Granted


75,000


$
28.75Exercised


Canceled


Outstanding at March 31, 2008


75,000


$
28.75


$
2,500Exercisable at March 31, 2008


      13




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##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
  5.
    Inventories    December 31,


March 31,2007


2008(Unaudited)(In thousands)Raw materials

$
551


$
685Work-in-process


602



392Finished goods


936



778Total inventories

$
2,089


$
1,855   6.
    Goodwill
    and Intangible Assets, Net    December 31,


March 31,2007


2008(Unaudited)(In thousands)Goodwill

$
117,502


$
264,536Acquired technology

$
48,462


$
65,256Contracts and customer lists


52,632



94,732Non-compete agreements


2,043



2,043Trademarks and domain names


191



1,016Patents and related costs


5,212



8,188Subtotal


108,540



171,235Less accumulated amortization


(57,693
)


(66,472
)Intangible assets, net

$
50,847


$
104,763       7.
    Debt   14




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##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
      EITF 04-8,
    The Effect of Contingently Convertible Instruments on
    Diluted Earnings per Share
       15




---



##### 



BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED
    FINANCIAL  (Continued)
    8.
    Commitments
    and Contingencies    9.
    Quarterly
    Financial Information   16




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  This report contains forward-looking statements. For this
    purpose, any statements contained herein that are not statements
    of historical fact may be deemed to be forward-looking
    statements. Without limiting the foregoing, the words
    believes, anticipates,
    plans, expects, intends and
    similar expressions are intended to identify forward-looking
    statements. The important factors discussed under the caption
    Risk Factors, presented below, could cause actual
    results to differ materially from those indicated by
    forward-looking statements made herein. We undertake no
    obligation to publicly update or revise any forward-looking
    statements, whether as a result of new information, future
    events or otherwise.
  General
        time-and-materials
  Blackboard Academic
    Suitetm, Blackboard Commerce
    Suitetm Blackboard
    Connecttm Blackboard Learning
    Systemtm, Blackboard Community
    Systemtm, Blackboard Content
    Systemtm, Blackboard Outcomes
    Systemtm, Blackboard Portfolio
    Systemtm tm Blackboard
    Onetm, Blackboard Connect.
     17




---



##### 



Critical
    Accounting Policies and Estimates
   18




---



##### 



Revenue recognition. 97-2, Software Revenue Recognition, SOP 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, with Respect to Certain
    Transactions.
      00-3, Application of AICPA
    SOP 97-2
    to Arrangements That Include the Right to Use Software Stored on
    Another Entitys Hardware. set-up
  SOP 97-2. time-and-materials
  when-and-if-available SOP 97-2.
  Allowance for doubtful accounts.
 19




---



##### 



Fair Value Measurements. Fair Value
    Measurements
          Long-lived assets. Accounting for the Impairment or Disposal of Long-Lived
    Assets.
  Goodwill and intangible assets. Goodwill and
    Other Intangible Assets.
    Income Taxes.
 20




---



##### 



Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109 Accounting for Income
    Taxes Accounting for
    Contingencies.
  Stock-Based Compensation. Share-Based
    Payment
  Recent Accounting Pronouncements. Business
    Combinations.
  No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2). FSP 157-2
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
 21




---



##### 



Important
    Factors Considered by Management
        
    Recurring ratable revenues include those product revenues that
    are recognized ratably over the contract term, which is
    typically one year, and that recur each year assuming clients
    renew their contracts. These revenues include revenues from the
    licensing of all of our software products, hosting arrangements,
    subscription fees from customers accessing our on-demand
    application services and enhanced support and maintenance
    contracts related to our software products, including certain
    professional services performed by our professional services
    groups.
    Non-recurring ratable revenues include those product revenues
    that are recognized ratably over the term of the contract, which
    is typically one year, but that do not contractually recur.
    These revenues include certain hardware components of our
    Blackboard Transaction Systemproducts and certain
    third-party hardware and software sold to our clients in
    conjunction with our software licenses.
    Other revenues include those revenues that are recognized as
    earned and are not deferred to future periods. These revenues
    include professional services, the sales of Blackboard
    One, certain sales of licenses, as well as the supplies and
    commissions we earn from publishers related to digital course
    supplement downloads.     22




---



##### 



Results
    of Operations
    Three MonthsEndedMarch 31,2007


2008(Unaudited)Revenues:Product


90
%


92
%Professional services


10



8Total revenues


100



100Operating expenses:Cost of product revenues, excludes amortization of acquired
    technology included in amortization of intangibles resulting
    from acquisitions shown below


21



23Cost of professional services revenues


7



7Research and development


12



14Sales and marketing


26



31General and administrative


17



19Amortization of intangibles resulting from acquisitions


10



13Total operating expenses


93



107Income (loss) from operations


7
%


(7
)%   Three
    Months Ended March 31, 2008 Compared to Three Months Ended
    March 31, 2007
      Three Months Ended March 31,2007


2008Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
42.0


$
0.7


$
42.7


$
53.7


$
0.9


$
54.6Non-recurring ratable revenues


5.1







5.1



5.5







5.5Other revenues


2.9



4.6



7.5



3.9



4.5



8.4Total revenues

$
50.0


$
5.3


$
55.3


$
63.1


$
5.4


$
68.5   Product revenues. Blackboard
    Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning System
 23




---



##### 



Blackboard Learning System Blackboard Learning System Blackboard Learning
    System Blackboard Connect
  Blackboard Commerce
    Suite
    Blackboard Academic Suite
  Professional services revenues.
  Cost of product revenues. Blackboard Connect
    Cost of professional services revenues.
 24




---



##### 



Research and development expenses.
  Sales and marketing expenses.
  General and administrative expenses.
  Net interest expense.
  Other income.
  (Provision) benefit for income taxes.
  Liquidity
    and Capital Resources
     25




---



##### 



EITF 04-8,
    The
 26




---



##### 



Effect of Contingently Convertible Instruments on Diluted
    Earnings per Share
              Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk.     27




---



##### 



Item 4.
    Controls
    and Procedures.  (a)  Evaluation
    of Disclosure Controls and Procedures.
  Rules 13a-15(e) 15d-15(e)
  (b)  Changes
    in Internal Control over Financial Reporting.
  Rules 13a-15(f) 15d-15(f)
 28




---



##### 



PART II.
    OTHER INFORMATION  Item 1A.
    Risk
    Factors.  Form 10-K
  Our
    merger with The NTI Group, Inc. (NTI) presents many
    risks, and we may not realize the financial and strategic goals
    that were contemplated at the time of the
    transaction.
    
    we may not realize the anticipated financial benefits if we are
    unable to sell the Blackboard Connectproducts to our
    customer base, if a larger than predicted number of customers
    decline to renew their contracts, or if the acquired contracts
    do not allow us to recognize revenues on a timely basis;
    we may have difficulty incorporating NTI technologies or
    products with our existing product lines and maintaining uniform
    standards, controls, procedures and policies;
    we may face contingencies related to product liability,
    intellectual property, financial disclosures, and accounting
    practices or internal controls;
    we may have higher than anticipated costs in supporting and
    continuing development of the Blackboard Connectproducts
    and in servicing new and existing Blackboard Connectclients;
    we may not be able to retain key employees from NTI;
    we may be unable to manage effectively the increased size and
    complexity of the combined company, and our managements
    attention may be diverted from our ongoing business by
    transition or integration issues;
    we may lose anticipated tax benefits or have additional legal or
    tax exposures; and
    we will not be able to determine whether all or any of the
    0.5 million shares of stock consideration in the merger
    that is contingent on the achievement of certain performance
    milestones will be issued until the completion of the financial
    results for fiscal year 2008 and 2009.  Our
    business strategy contemplates future business combinations and
    acquisitions which may be difficult to integrate, disrupt our
    business, dilute stockholder value or divert management
    attention.
       29




---



##### 



Our
    indebtedness could adversely affect our financial condition and
    prevent us from fulfilling our debt obligations, including the
    3.25% Convertible Senior Notes due 2027 (the
    Notes).
    
    we will use a significant portion of our cash flow to pay
    interest on our outstanding debt and to pay principal when
    required, limiting the amount available for working capital,
    capital expenditures and other general corporate purposes;
    lenders may be unwilling to lend additional amounts to us for
    future working capital needs, additional acquisitions or other
    purposes or may only be willing to provide funding on terms we
    would consider unacceptable;
    if our cash flow were inadequate to make interest and principal
    payments on our debt, we might have to refinance our
    indebtedness and may not be successful in those efforts; and
    our ability to finance working capital needs and general
    corporate purposes for the public and private markets, as well
    as the associated cost of funding, is dependent, in part, on our
    credit ratings, which may be adversely affected if we experience
    declining revenues.    We may
    not be able to repurchase the Notes when required by the
    holders, including upon a fundamental change or other specified
    dates at the option of the holder, or pay cash upon conversion
    of the Notes.
    Conversion
    of the Notes may affect the market price of our common stock and
    may dilute the ownership of existing stockholders.
   30




---



##### 



Our
    reported earnings per share may be more volatile because of the
    contingent conversion provision of the Notes.
    The
    accounting method for convertible debt securities with net share
    settlement, like the Notes, may be subject to
    change.
    Providing
    enterprise software applications to the education industry is an
    emerging and uncertain business; if the market for our products
    fails to develop, we will not be able to grow our
    business.
  Blackboard Outcomes System Blackboard Connect Blackboard Outcomes
    System Blackboard Connect
  We
    face intense and growing competition, which could result in
    price reductions, reduced operating margins and loss of market
    share.
    Blackboard Academic Suite Blackboard Commerce
    Suite Blackboard Connect
 31




---



##### 



and/or
    If
    potential clients or competitors use open source software to
    develop products that are competitive with our products and
    services, we may face decreased demand and pressure to reduce
    the prices for our products.
  Blackboard Academic Suite
  Because
    most of our licenses are renewable on an annual basis, a
    reduction in our license renewal rate could significantly reduce
    our revenues.
      Because
    we generally recognize revenues ratably over the term of our
    contract with a client, downturns or upturns in sales will not
    be fully reflected in our operating results until future
    periods.
   32




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Our
    operating margins may suffer if our professional services
    revenues increase in proportion to total revenues because our
    professional services revenues have lower gross
    margins.
    If our
    products contain errors, new product releases are delayed or our
    services are disrupted, we could lose new sales and be subject
    to significant liability claims.
    
    delays in or loss of market acceptance of our products;
    diversion of our resources;
    a lower rate of license renewals or upgrades;
    injury to our reputation; and
    increased service expenses or payment of damages.    The
    length and unpredictability of the sales cycle for our software
    could delay new sales and cause our revenues and cash flows for
    any given quarter to fail to meet our projections or market
    expectations.
    
    clients budgetary constraints and priorities;
    the timing of our clients budget cycles;
    the need by some clients for lengthy evaluations that often
    include both their administrators and faculties; and
    the length and timing of clients approval processes. 33




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Our
    sales cycle with international postsecondary education providers
    and U.S. K-12 schools may be longer than our historic U.S.
    postsecondary sales cycle, which could cause us to incur greater
    costs and could reduce our operating margins.
    We may
    have exposure to greater than anticipated tax
    liabilities.
    Our
    ability to utilize our net operating loss carryforwards may be
    limited.
      The
    investment of our cash balance and our investments in marketable
    debt securities are subject to risks which may cause losses and
    affect the liquidity of these investments.
    Our
    future success depends on our ability to continue to retain and
    attract qualified employees.
   34




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If we
    do not maintain the compatibility of our products with
    third-party applications that our clients use in conjunction
    with our products, demand for our products could
    decline.
    If we
    are unable to protect our proprietary technology and other
    rights, it will reduce our ability to compete for
    business.
    If we
    are found to infringe the proprietary rights of others, we could
    be required to redesign our products, pay significant royalties
    or enter into license agreements with third
    parties.
    
    be expensive and time consuming to defend;
    force us to stop licensing our products that incorporate the
    challenged intellectual property;
    require us to redesign our products and reimburse certain costs
    to our clients;
    divert managements attention and other company
    resources; and
    require us to enter into royalty or licensing agreements in
    order to obtain the right to use necessary technologies, which
    may not be available on terms acceptable to us, or at all. 35




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Expansion
    of our business internationally will subject our business to
    additional economic and operational risks that could increase
    our costs and make it difficult for us to operate
    profitably.
    
    foreign currency fluctuations, which could result in reduced
    revenues and increased operating expenses;
    potentially longer payment and sales cycles;
    difficulty in collecting accounts receivable;
    the effect of applicable foreign tax structures, including tax
    rates that may be higher than tax rates in the United States or
    taxes that may be duplicative of those imposed in the United
    States;
    tariffs and trade barriers;
    general economic and political conditions in each country;
    inadequate intellectual property protection in foreign countries;
    uncertainty regarding liability for information retrieved and
    replicated in foreign countries;
    the difficulties and increased expenses in complying with a
    variety of foreign laws, regulations and trade
    standards; and
    unexpected changes in regulatory requirements.  Unauthorized
    disclosure of data, whether through breach of our computer
    systems or otherwise, could expose us to protracted and costly
    litigation or cause us to lose clients.
    Operational
    failures in our network infrastructure could disrupt our remote
    hosting services, could cause us to lose clients and sales to
    potential clients and could result in increased expenses and
    reduced revenues.
   36




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We
    could lose revenues if there are changes in the spending
    policies or budget priorities for government funding of
    colleges, universities, schools and other education
    providers.
    U.S.
    and foreign government regulation of the Internet could cause us
    to incur significant expenses, and failure to comply with
    applicable regulations could make our business less efficient or
    even impossible.
      
    The Childrens Online Protection Act and the
    Childrens Online Privacy Protection Act restrict the
    distribution of certain materials deemed harmful to children and
    impose additional restrictions on the ability of online services
    to collect personal information from children under the age of
    13; and
    The Family Educational Rights and Privacy Act imposes parental
    or student consent requirements for specified disclosures of
    student information, including online information.    We may
    be subject to state and federal financial services regulation,
    and any violation of any present or future regulation could
    expose us to liability, force us to change our business
    practices or force us to stop selling or modify our products and
    services.
  Blackboard Transaction System
 37




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
    disclosure of consumer rights and our business policies and
    practices;
    restrictions on uses and disclosures of customer information;
    error resolution procedures;
    limitations on consumers liability for unauthorized
    account activity;
    data security requirements;
    government registration; and
    reporting and documentation requirements.    Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds.         38




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Item 6.
    Exhibits.    Exhibit No.

Description2
.1(1)

Agreement and Plan of Merger, dated as of January 11, 2008,
    by and among Blackboard Inc., Bookstore Merger Sub, Inc., The
    NTI Group, Inc. and Pace Holdings, LLC.4
.1(2)

Registration Rights Agreement, dated as of January 31, 2008.4
.2(3)

Form of Registration Rights and Earnout Stock Agreement, dated
    as of January 31, 2008.4
.3(4)

Escrow Agreement, dated as of January 31, 2008.4
.4(5)

Form of Investment Agreement dated as of January 31, 2008.31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of Chief Executive Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Chief Financial Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     (1)
    
    Incorporated by reference to Exhibit 2.1 to the
    Companys Current Report filed on
    Form 8-K
    on January 14, 2008.(2)
    
    Incorporated by reference to Exhibit 10.3 of the
    Companys Current Report filed on
    Form 8-K
    on January 31, 2008.(3)
    
    Incorporated by reference to Exhibit 10.1 of the
    Companys Current Report filed on
    Form 8-K
    on January 31, 2008.(4)
    
    Incorporated by reference to Exhibit 10.2 of the
    Companys Current Report filed on
    Form 8-K
    on January 31, 2008(5)
    
    Incorporated by reference to Exhibit 4.5 to the
    Companys Automatic Shelf Registration Statement filed on
    Form S-3
    on January 31, 2008. 39




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SIGNATURE    Blackboard Inc.
  By:
    /s/  Michael
    J. Beach    (On behalf of the registrant and as Principal
 Financial Officer)
   40