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
    September 30, 2009ORo

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.)650 Massachusetts Avenue, N.W.
    Washington D.C.(Address of Principal
    Executive Offices)

20001(Zip Code)    Registrants Telephone Number, Including Area Code:
 (202) 463-4860
  þ o
  Regulation S-T o o
  Rule 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 October 31, 2009Common Stock, $0.01 par value

32,546,577




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##### 





Blackboard
    Inc.
  Quarterly
    Report on
    Form 10-Q
 For the
    Quarter Ended September 30, 2009
  INDEX
   
 PART I. FINANCIAL INFORMATIONItem 1.


Consolidated Financial StatementsUnaudited Consolidated Balance Sheets as of
    December 31, 2008 and September 30, 2009


1Unaudited Consolidated Statements of Operations
    for the Three and Nine Months Ended September 30, 2008 and
    2009


2Unaudited Consolidated Statements of Cash Flows
    for the Nine Months Ended September 30, 2008 and 2009


3Notes to Unaudited Consolidated Financial
    Statements


4Item 2.


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


22Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


39Item 4.


Controls and Procedures


39PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


40Item 1A.


Risk Factors


40Item 6.


Exhibits


50Signature





51     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.UNAUDITED CONSOLIDATED BALANCE SHEETS
    (In thousands, except share and per share data)
  December 31,


September 30,2008


2009(As adjusted (1))Current assets:Cash and cash equivalents

$
141,746


$
132,049Accounts receivable, net of allowance for doubtful accounts of
    $926 and $2,159, respectively


92,529



93,018Inventories


1,783



2,140Prepaid expenses and other current assets


8,361



12,235Deferred tax asset, current portion


1,796



5,255Deferred cost of revenues


7,126



7,609Total current assets


253,341



252,306Deferred tax asset, noncurrent portion


18,897



9,067Investment in common stock warrant


1,990



3,124Restricted cash


4,249



4,139Property and equipment, net


31,950



36,286Other assets


549



936Goodwill


263,850



329,287Intangible assets, net


75,126



80,586Total assets

$
649,952


$
715,731Current liabilities:Accounts payable

$
2,579


$
5,524Accrued expenses


27,879



35,880Deferred rent, current portion


345



975Deferred revenues, current portion


179,238



200,472Total current liabilities


210,041



242,851Convertible senior notes, net of debt discount of $15,077 and
    $10,388, respectively


149,923



154,612Deferred rent, noncurrent portion


10,959



11,674Deferred revenues, noncurrent portion


5,554



6,536Total liabilities


376,477



415,673Commitments 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; 31,359,738 and 32,203,982 shares issued and
    outstanding, respectively


314



322Additional paid-in capital


356,683



383,060Accumulated deficit


(83,522
)


(83,324
)Total stockholders equity


273,475



300,058Total liabilities and stockholders equity

$
649,952


$
715,731       (1)
    
    On January 1, 2009, the Company adopted ASC 470,
    Debt, (Prior authoritative literature: FASB
    Staff Position No. APB
    14-1,
    Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion) which required
    adjustment of prior periods. See Note 7 of notes to
    unaudited consolidated financial statements. 1




---



##### 



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


Nine Months EndedSeptember 30,


September 30,2008


2009


2008


2009(As adjusted (1))





(As adjusted (1))Revenues:Product

$
74,332


$
87,862


$
205,818


$
251,369Professional services


8,758



10,546



21,295



25,597Total revenues


83,090



98,408



227,113



276,966Operating expenses:Cost of product revenues, excludes $4,572 and $2,480 for the
    three months ended September 30, 2008 and 2009,
    respectively, and $13,232 and $8,153 for the nine months ended
    September 30, 2008 and 2009, respectively, in amortization
    of acquired technology included in amortization of intangibles
    resulting from acquisitions shown below(2)


19,626



23,849



53,597



67,055Cost of professional services revenues(2)


4,994



5,550



15,078



15,020Research and development(2)


10,514



11,428



30,191



33,848Sales and marketing(2)


24,079



24,670



67,699



74,008General and administrative(2)


12,716



14,636



37,931



42,476Patent related (proceeds) impairment and other costs










(3,313
)


10,984Amortization of intangibles resulting from acquisitions


9,729



9,282



28,137



25,728Total operating expenses


81,658



89,415



229,320



269,119Income (loss) from operations


1,432



8,993



(2,207
)


7,847Other (expense) income, net:Interest expense


(3,004
)


(3,015
)


(9,073
)


(8,877
)Interest income


339



36



1,487



202Other (expense) income


(233
)


300



3,857



1,103(Loss) income before benefit (provision) for income taxes


(1,466
)


6,314



(5,936
)


275Benefit (provision) for income taxes


2,351



(2,007
)


2,243



(77
)Net income (loss)

$
885


$
4,307


$
(3,693
)

$
198Net income (loss) per common share:Basic

$
0.03


$
0.13


$
(0.12
)

$
0.01Diluted

$
0.03


$
0.13


$
(0.12
)

$
0.01Weighted average number of common shares:Basic


31,184,215



32,073,491



30,754,997



31,682,212Diluted


32,203,249



33,045,337



30,754,997



32,466,179(2) Includes the following amounts related to stock-based
    compensation:Cost of product revenues

$
244


$
347


$
679


$
923Cost of professional services revenues


8



138



240



398Research and development


195



284



547



768Sales and marketing


1,549



1,501



4,630



4,625General and administrative


1,636



1,775



5,015



5,270       (1)
    
    On January 1, 2009, the Company adopted ASC 470,
    Debt, (Prior authoritative literature: FASB
    Staff Position No. APB
    14-1,
    Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion) which required
    adjustment of prior periods. See Note 7 of notes to
    unaudited consolidated financial statements. 2




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##### 



BLACKBOARD
    INC.UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)
  Nine MonthsEnded September 30,2008


2009(As adjusted (1))Cash flows from operating activitiesNet (loss) income

$
(3,693
)

$
198Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Deferred tax benefit


(6,094
)


(2,455
)Excess tax benefit from stock-based compensation


(1,903
)


(763
)Amortization of debt discount


4,777



4,689Depreciation and amortization


11,642



14,045Amortization of intangibles resulting from acquisitions


28,137



25,728Patent related impairment charge






7,447Change in allowance for doubtful accounts


245



1,233Stock-based compensation


11,111



11,984Gain on investment in common stock warrant


(3,980
)


(1,136
)Changes in operating assets and liabilities, net of effect of
    acquisitions:Accounts receivable


(41,818
)


987Inventories


59



(357
)Prepaid expenses and other current assets


(2,545
)


(3,319
)Deferred cost of revenues


(6
)


(483
)Accounts payable


(2,027
)


2,885Accrued expenses


1,006



8,780Deferred rent


8,575



1,345Deferred revenues


51,932



19,002Net cash provided by operating activities


55,418



89,810Cash flows from investing activitiesAcquisitions, net of cash acquired


(132,992
)


(91,784
)Purchases of property and equipment


(22,297
)


(15,919
)Purchases of
    available-for-sale
    securities






(6,586
)Redemptions of
    available-for-sale
    securities






6,586Payments for patent enforcement costs


(3,141
)


(414
)Proceeds from sale of investment in common stock warrant


1,990



Net cash used in investing activities


(156,440
)


(108,117
)Cash flows from financing activitiesReleases of letters of credit


777



110Payments on letters of credit


(127
)


Excess tax benefits from stock-based compensation


1,903



763Proceeds from exercise of stock options


10,657



7,737Net cash provided by financing activities


13,210



8,610Net decrease in cash and cash equivalents


(87,812
)


(9,697
)Cash and cash equivalents at beginning of period


206,558



141,746Cash and cash equivalents at end of period

$
118,746


$
132,049       (1)
    
    On January 1, 2009, the Company adopted ASC 470,
    Debt, (Prior authoritative literature: FASB
    Staff Position No. APB
    14-1,
    Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion) which required
    adjustment of prior periods. See Note 7 of notes to
    unaudited consolidated financial statements. 3




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 For the
    Nine Months Ended September 30, 2008 and 2009
  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 and Organization    2.
    Basis of
    Presentation  Form 10-Q Regulation S-X.
  Form 10-K
  Subsequent Events Subsequent Events
  Principles
    of Consolidation
    Foreign
    Currency Translation
    Use of
    Estimates
   4




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value Measurements
  Fair Value Measurements and Disclosures, Fair Value
    Measurements, No. 157-2, Effective Date of FASB Statement
    No. 157
    Level 2 
    inputs other than Level 1 quoted prices in active markets
    that are either directly or indirectly observable      Quoted Prices inActive Markets


Significant Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


InputsSeptember 30, 2009


(Level 1)


(Level 2)


(Level 3)Assets:Cash equivalents(1)

$
97,768


$
97,768


$



$
Investment in common stock warrant


3,124











3,124Total Assets

$
100,892


$
97,768


$



$
3,124Liabilities:Convertible senior notes(2)

$
163,350


$
163,350


$



$
     (1)
    
    Cash equivalents consist of money market funds with original
    maturity dates of less than three months for which the fair
    value is based on quoted market prices.(2)
    
    The fair value of the Companys convertible senior notes is
    based on the quoted market price.  other-than-temporarily
 5




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Investment inCommon StockWarrantBalance on December 31, 2008

$
Transfers in and/or (out) of Level 3


1,990Total gains (losses) realized / unrealized included in earnings


1,134Purchases, sales, issuances and settlements, net


Balance on September 30, 2009

$
3,124     Financial Instruments, SFAS 107-1 28-1 Interim Disclosures about Fair Value of Financial
    Instruments
  Investment
    in Common Stock Warrant
  Derivatives and Hedging Accounting for Derivative
    Instruments and Hedging Activity
  Business
    Combinations
  Business Combinations Business
    Combinations
 6




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Intangibles-Goodwill and Other Goodwill and Other Intangible Assets
  Income
    Taxes
    Compensation-Stock Compensation Share-Based
    Payment
  Income
    Taxes Accounting
    for Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  Revenue
    Recognition and Deferred Revenue
  Software 97-2, Software Revenue Recognition, SOP 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, with Respect to Certain
    Transactions
 7




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        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
  time-and-materials
  when-and-if-available
  Cost
    of Revenues and Deferred Cost of Revenues
  Blackboard Connect
 8




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue Recognition
  Basic
    and Diluted Net Income (Loss) per Common Share
      Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2009


2008


2009(Unaudited)(In thousands, except share and per share amounts)Net income (loss)

$
885


$
4,307


$
(3,693
)

$
198Weighted average shares outstanding, basic


31,184,215



32,073,491



30,754,997



31,682,212Dilutive effect of:Stock options related to the purchase of common stock


1,019,034



971,846







783,967Weighted average shares outstanding, diluted


32,203,249



33,045,337



30,754,997



32,466,179Basic net income (loss) per common share

$
0.03


$
0.13


$
(0.12
)

$
0.01Diluted net income (loss) per common share

$
0.03


$
0.13


$
(0.12
)

$
0.01     Stock-Based
    Compensation
   9




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Comprehensive
    Net Income (Loss)
    Recent
    Accounting Pronouncements
  2009-13 No. 08-1, Revenue Arrangements with Multiple
    Deliverables No. 00-21 Revenue Arrangements with Multiple
    Deliverables 2009-13 2009-13 2009-13
  2009-14 No. 09-3, Certain Revenue Arrangements That Include Software
    Elements SOP 97-2, Software Revenue Recognition 2009-14 2009-13. 2009-14
  3.
    Mergers
    and Acquisitions  Terriblyclever
    Design, LLC Asset Purchase
  MobilEdu tm Blackboard MobilEdu
     10




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ANGEL
    Learning, Inc. Merger
    e-learning e-learning.
    Preliminary
    Purchase Price Allocation
    Cash and cash equivalents

$
6,579Accounts receivable


2,629Prepaid expenses and other current assets


897Property and equipment


2,133Other assets


43Accounts payable


(59
)Other accrued liabilities


(941
)Deferred tax liabilities, net


(8,911
)Deferred revenue


(3,213
)Net tangible liabilities acquired


(843
)Definite-lived intangible assets acquired


36,760Goodwill


65,388Total estimated purchase price

$
101,305    11




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Deferred
    Revenue
  build-up build-up
 12




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pro
    Forma Financial Information
      Three Months Ended

Nine Months EndedSeptember 30,

September 30,2008

2009

2008

2009(Unaudited)(In thousands, except per share amounts)Total revenues

$
88,569


$
98,408


$
245,695


$
285,129Net (loss) income

$
(1,897
)

$
4,307


$
(8,276
)

$
(3,328
)Basic net (loss) income per common share

$
(0.06
)

$
0.13


$
(0.27
)

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

$
(0.06
)

$
0.13


$
(0.27
)

$
(0.11
)   NTI
    Group, Inc. Merger
   13




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            4.
    Stock-Based
    Compensation  Stock
    Incentive Plans
     14




---



##### 



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


Weighted Average


AggregateShares


Price/Share


Intrinsic ValueExercisable at December 31, 2008


2,416,333


$
22.91Outstanding at December 31, 2008


4,864,260


$
27.80Granted


1,129,800


$
28.94Exercised


(428,377
)

$
19.01


$
6,262Cancelled


(264,417
)

$
32.16Outstanding at September 30, 2009


5,301,266


$
28.54


$
50,385Exercisable at September 30, 2009


2,711,809


$
26.14


$
32,253     Three Months Ended September 30

Nine Months Ended September 30,2008

2009

2008

2009Dividend yield


0
%


0
%


0
%


0
%Expected volatility


39.5
%


47.2
%


39.6
%


47.5
%Risk-free interest rate


2.9
%


2.5
%


2.9
%


1.8
%Expected life of options


4.9 years



4.9 years



4.9 years



4.9 yearsForfeiture rate


15.8
%


18.5
%


11.2
%


15.0
%   Dividend yield
  Expected volatility
  Risk-free interest rate
  Expected life of the options Share-Based
    Payment
  Forfeiture rate
 15




---



##### 



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


Weighted Average


AggregateShares


Fair Value/Share


Intrinsic ValueUnvested at December 31, 2008


70,000


$
29.25Granted


216,000



29.24Vested and issued


Cancelled


(17,500
)


29.07Unvested at September 30, 2009


268,500


$
29.25


$
10,144       5.
    Inventories    December 31,


September 30,2008


2009(In thousands)Raw materials

$
678


$
874Work-in-process


547



580Finished goods


558



686Total inventories

$
1,783


$
2,140  16




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Goodwill
    and Intangible Assets    Weighted-AverageDecember 31,


September 30,


Amortization2008


2009


Period(In thousands)


(In years)Goodwill

$
263,850


$
329,287Acquired technology

$
65,255


$
68,955



2.9Accumulated amortization


(49,199
)


(57,352
)Acquired technology, net


16,056



11,603Contracts and customer lists


94,732



130,675



5.0Accumulated amortization


(43,704
)


(62,848
)Contracts and customer lists, net


51,028



67,827Trademarks and domain names


1,016



1,976



2.3Accumulated amortization


(443
)


(876
)Trademarks and domain names, net


573



1,100Patents and related costs


8,198



101



2.0Accumulated amortization


(729
)


(45
)Patents and related costs, net


7,469



56Intangible assets, net

$
75,126


$
80,586         7.
    Notes
    Payable     17




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Earnings Per Share, EITF 04-8,
    The Effect of Contingently Convertible Instruments on
    Diluted Earnings per Share,
  in-the-money
       18




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Adoption
    ASC 470 (Prior authoritative literature: FSP APB
    14-1)
  Debt 14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion
         19




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended September 30, 2008


Three Months Ended September 30, 2009Incremental








IncrementalImpact of





Before the


Impact ofAs Previously


Adoption of





Impact of


Adoption ofReported


ASC 470


As Adjusted


ASC 470


ASC 470


As ReportedInterest expense

$
(1,798
)

$
(1,206
)

$
(3,004
)

$
(1,721
)

$
(1,294
)

$
(3,015
)Benefit (Provision) for income taxes


2,351







2,351



(2,007
)






(2,007
)Net income (loss)


2,091



(1,206
)


885



5,601



(1,294
)


4,307Net income (loss) per common share:Basic

$
0.07


$
(0.04
)

$
0.03


$
0.17


$
(0.04
)

$
0.13Diluted

$
0.06


$
(0.03
)

$
0.03


$
0.17


$
(0.04
)

$
0.13     Nine Months Ended September 30, 2008


Nine Months Ended September 30, 2009Incremental








IncrementalImpact of





Before the


Impact ofAs Previously


Adoption of





Impact of


Adoption ofReported


ASC 470


As Adjusted


ASC 470


ASC 470


As ReportedInterest expense

$
(5,545
)

$
(3,528
)

$
(9,073
)

$
(5,104
)

$
(3,773
)

$
(8,877
)Benefit (Provision) for income taxes


2,243







2,243



(77
)






(77
)Net (loss) income


(165
)


(3,528
)


(3,693
)


3,971



(3,773
)


198Net (loss) income per common share:Basic

$
(0.01
)

$
(0.11
)

$
(0.12
)

$
0.13


$
(0.12
)

$
0.01Diluted

$
(0.01
)

$
(0.11
)

$
(0.12
)

$
0.12


$
(0.11
)

$
0.01     December 31, 2008


September 30, 2009Incremental








IncrementalImpact of





Before the


Impact ofAs Previously


Adoption of





Impact of


Adoption ofReported


ASC 470


As Adjusted


ASC 470


ASC 470


As ReportedPrepaid expenses and other current assets

$
8,518


$
(157
)

$
8,361


$
12,386


$
(151
)

$
12,235Deferred tax assets


28,942



(8,249
)


20,693



22,571



(8,249
)


14,322Notes payable, net of debt discount


163,172



(13,249
)


149,923



164,088



(9,476
)


154,612Additional paid-in capital


344,698



11,985



356,683



371,075



11,985



383,060Accumulated deficit


(76,380
)


(7,142
)


(83,522
)


(72,409
)


(10,915
)


(83,324
)   No. 07-5, Determining Whether an Instrument (or Embedded Feature)
    Is Indexed to an Entitys Own Stock
 20




---



##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Commitments
    and Contingencies        9.
    Quarterly
    Financial Information   21




---



##### 



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
      MobilEdu tm Blackboard MobilEdu
    time-and-materials
  Blackboard Academic
    Suitetm, Blackboard Commerce
    Suitetm Blackboard
    Connecttm Blackboard Learning
    Systemtm Blackboard
 22




---



##### 



Community
    Systemtm Blackboard Content
    Systemtm Blackboard Outcomes
    Systemtm Blackboard Portfolio
    Systemtm,

    Blackboard Transaction
    Systemtm One tm Blackboard
    Connecttm
    
    Blackboard
    Learntm;
    Blackboard
    Transacttm; and
    Blackboard
    Connecttm.  Blackboard
    Learn tm Blackboard Academic
    Suite tm Blackboard
    Learn tm Release 9.0 Blackboard Learn Course Delivery, Community Engagement, Content Management,
    Portfolio Management, and Outcomes Assessment Blackboard
    Academic Suite
  Offered
in Blackboard Academic
Suitetm

Offered
in Blackboard
LearntmThe
Blackboard Learning
Systemtm

Course DeliverymoduleThe
Blackboard Community
Systemtm

Community EngagementmoduleThe
Blackboard Content
Systemtm

Content ManagementmoduleThe
Blackboard Portfolio
Systemtm

Portfolio ManagementmoduleThe
Blackboard Outcomes
Systemtm

Outcomes Assessmentmodule   Blackboard Commerce
    Suitetm Blackboard
    Transacttm. Blackboard
    Connect tm
      Blackboard Connect
     23




---



##### 



Critical
    Accounting Policies and Estimates
      Revenue recognition. Software 97-2, Software Revenue Recognition, SOP 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, with Respect to Certain
    Transactions).
   24




---



##### 



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
  time-and-materials
  when-and-if-available
  Allowance for doubtful accounts.
  Fair Value Measurements. Fair Value
    Measurements and Disclosures Fair Value Measurements No. 157-2, Effective Date of FASB Statement
    No. 157
 25




---



##### 



Level 1 
    quoted prices in active markets for identical assets and
    liabilitiesLevel 2 
    inputs other than Level 1 quoted prices in active markets
    that are either directly or indirectly observableLevel 3 
    unobservable inputs that are corroborated by little or no market
    data  other-than-temporarily
      Financial
    Instruments, SFAS 107-1 28-1 Interim Disclosures about Fair Value of Financial
    Instruments
  Business combinations. Business
    Combinations Business
    Combinations
  Long-lived assets. Property, Plant and
    Equipment Accounting for the Impairment
    or Disposal of Long-Lived Assets
 26




---



##### 



Goodwill and intangible assets. Intangibles-Goodwill and
    Other Goodwill and Other Intangible
    Assets
    Notes payable. Debt 14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion
         27




---



##### 



Three Months Ended September 30, 2008


Three Months Ended September 30, 2009Incremental








IncrementalImpact of





Before the


Impact ofAs Previously


Adoption of





Impact of


Adoption ofReported


ASC 470


As Adjusted


ASC 470


ASC 470


As ReportedInterest expense

$
(1,798
)

$
(1,206
)

$
(3,004
)

$
(1,721
)

$
(1,294
)

$
(3,015
)Benefit (Provision) for income taxes


2,351







2,351



(2,007
)






(2,007
)Net income (loss)


2,091



(1,206
)


885



5,601



(1,294
)


4,307Net income (loss) per common share:Basic

$
0.07


$
(0.04
)

$
0.03


$
0.17


$
(0.04
)

$
0.13Diluted

$
0.06


$
(0.03
)

$
0.03


$
0.17


$
(0.04
)

$
0.13     Nine Months Ended September 30, 2008


Nine Months Ended September 30, 2009Incremental








IncrementalImpact of





Before the


Impact ofAs Previously


Adoption of





Impact of


Adoption ofReported


ASC 470


As Adjusted


ASC 470


ASC 470


As ReportedInterest expense

$
(5,545
)

$
(3,528
)

$
(9,073
)

$
(5,104
)

$
(3,773
)

$
(8,877
)Benefit (Provision) for income taxes


2,243







2,243



(77
)






(77
)Net (loss) income


(165
)


(3,528
)


(3,693
)


3,971



(3,773
)


198Net (loss) income per common share:Basic

$
(0.01
)

$
(0.11
)

$
(0.12
)

$
0.13


$
(0.12
)

$
0.01Diluted

$
(0.01
)

$
(0.11
)

$
(0.12
)

$
0.12


$
(0.11
)

$
0.01     December 31, 2008


September 30, 2009Incremental








IncrementalImpact of





Before the


Impact ofAs Previously


Adoption of





Impact of


Adoption ofReported


ASC 470


As Adjusted


ASC 470


ASC 470


As ReportedPrepaid expenses and other current assets

$
8,518


$
(157
)

$
8,361


$
12,386


$
(151
)

$
12,235Deferred tax assets


28,942



(8,249
)


20,693



22,571



(8,249
)


14,322Notes payable, net of debt discount


163,172



(13,249
)


149,923



164,088



(9,476
)


154,612Additional paid-in capital


344,698



11,985



356,683



371,075



11,985



383,060Accumulated deficit


(76,380
)


(7,142
)


(83,522
)


(72,409
)


(10,915
)


(83,324
)   Derivatives and Hedging No. 07-5, Determining Whether an Instrument (or Embedded Feature)
    Is Indexed to an Entitys Own Stock
 28




---



##### 



Income Taxes.
    Income
    Taxes, Accounting for Uncertainty
    in Income Taxes  an interpretation of FASB Statement
    No. 109
  Stock-Based Compensation. Compensation-Stock Compensation Share-Based Payment
  Recent Accounting Pronouncements. 2009-13 No. 08-1, Revenue Arrangements with Multiple
    Deliverables Revenue Recognition No. 00-21 Revenue Arrangements with Multiple
    Deliverables 2009-13 2009-13 2009-13
  2009-14 No. 09-3, Certain Revenue Arrangements That Include Software
    Elements SOP 97-2, Software Revenue Recognition 2009-14 2009-13. 2009-14
 29




---



##### 



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 BbOne,
    certain sales of licenses, as well as the supplies and
    commissions we earn from publishers related to digital course
    supplement downloads.     30




---



##### 



Results
    of Operations
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2008


2009


2008


2009(As adjusted (1))





(As adjusted (1))(Unaudited)Revenues:Product


89
%


89
%


91
%


91
%Professional services


11



11



9



9Total revenues


100



100



100



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


24



24



24



24Cost of professional services revenues


6



6



6



6Research and development


12



12



13



12Sales and marketing


29



25



30



27General and administrative


15



15



17



15Patent related (proceeds) impairment and other costs










(1
)


4Amortization of intangibles resulting from acquisitions


12



9



12



9Total operating expenses


98



91



101



97Income (loss) from operations


2
%


9
%


(1
)%


3
%     (1)
    
    On January 1, 2009, we adopted ASC 470, which required
    adjustment of prior periods. See note 7 of Notes to
    unaudited consolidated financial statements.  Three
    Months Ended September 30, 2009 Compared to Three Months
    Ended September 30, 2008
      Three Months Ended September 30,2008


2009Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
64.4


$
1.1


$
65.5


$
76.9


$
2.3


$
79.2Non-recurring ratable revenues


6.5







6.5



6.2



0.6



6.8Other revenues


3.4



7.7



11.1



4.8



7.6



12.4Total revenues

$
74.3


$
8.8


$
83.1


$
87.9


$
10.5


$
98.4   Product revenues.
 31




---



##### 



Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Connect
    Blackboard Connect Blackboard Learn
  Professional services revenues.
  Cost of product revenues.
   32




---



##### 



Cost of professional services revenues.
  Research and development expenses.
  Sales and marketing expenses.
  General and administrative expenses.
  Amortization of intangibles resulting from
    acquisitions.
  Net interest expense.
  Other (expense) income.
  Benefit (provision) for income taxes.
 33




---



##### 



Nine
    Months Ended September 30, 2009 Compared to Nine Months
    Ended September 30, 2008
      Nine Months Ended September 30,2008


2009Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
176.9


$
2.9


$
179.8


$
220.5


$
5.0


$
225.5Non-recurring ratable revenues


18.2







18.2



18.2



1.0



19.2Other revenues


10.7



18.4



29.1



12.7



19.6



32.3Total revenues

$
205.8


$
21.3


$
227.1


$
251.4


$
25.6


$
277.0   Product revenues. Blackboard Connect Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn Blackboard Learn
    Blackboard Connect Blackboard Learn
 34




---



##### 



Professional services revenues. Blackboard Connect
  Cost of product revenues. Blackboard Connect
    Cost of professional services revenues.
  Research and development expenses.
  Sales and marketing expenses.
 35




---



##### 



General and administrative expenses.
  Patent related (proceeds) impairment and other
    costs.
  Amortization of intangibles resulting from
    acquisitions.
  Net interest expense.
  Other (expense) income.
      Benefit (provision) for income taxes.
 36




---



##### 



Liquidity
    and Capital Resources
        MobilEdu tm Blackboard MobilEdu
    Notes
    Payable
   37




---



##### 



Earnings Per Share, EITF 04-8, The Effect of Contingently Convertible Instruments on
    Diluted Earnings per Share,
  in-the-money
        Working
    Capital Needs
   38




---



##### 



Off-Balance
    Sheet Arrangements
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk.      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)
 39




---



##### 



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings      Item 1A.
    Risk
    Factors.  Form 10-K Form 10-Q
  Challenging
    economic conditions may adversely affect our
    business.
    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.
   40




---



##### 



There
    is no assurance that our investments in product development and
    product acquisition will be successful; if our products do not
    gain market acceptance, our revenues may decrease and we may not
    realize a return on such investments.
  Blackboard Learn Blackboard Learn
  Blackboard Outcomes System,
    Blackboard Connect Blackboard MobilEdu Blackboard Outcomes System Blackboard Connect Blackboard MobilEdu
  We
    face intense and growing competition, which could result in
    price reductions, reduced operating margins and loss of market
    share.
    Blackboard Learn Blackboard Transact Blackboard Connect and/or
   41




---



##### 



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.
    Our
    mergers with The NTI Group, Inc. (NTI) and ANGEL
    Learning, Inc. (ANGEL) present many risks, and we
    may not realize the financial and strategic goals that were
    contemplated at the time of the transactions.
  We completed the merger with NTI on January 31,
    2008.
  
    we may not realize the anticipated financial benefits if we are
    unable to sell the acquired company products 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 the acquired 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 acquired company products and in
    servicing new and existing clients of a company we acquire;
    we may not be able to retain key employees from the companies we
    acquire;
    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
    0.4 million shares of stock consideration in the NTI merger
    that remains contingent on the achievement of certain
    performance milestones will be issued until the completion of
    the financial results for fiscal year 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.
   42




---



##### 



Our
    existing indebtedness could adversely affect our financial
    condition and we may not be able to fulfill our debt
    obligations, including the 3.25% Convertible Senior Notes
    due 2027 (the Notes).
    
    upon conversion or redemption of the Notes, we will be required
    to repay the principal amount of $165.0 million in cash;
    we will use a significant portion of our cash flow to pay
    interest on our outstanding debt, 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 or issue additional equity or other securities and
    may not be successful in those efforts or may not obtain terms
    favorable to us; 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 defined fundamental change or other
    specified dates at the option of the holder, or pay cash upon
    conversion of the Notes.
   43




---



##### 



Conversion
    of the Notes may affect the market price of our common stock and
    may dilute the ownership of existing stockholders.
    Our
    reported earnings per share may be more volatile because of the
    contingent conversion provision of the Notes.
    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.
   44




---



##### 



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.   45




---



##### 



Our
    sales cycle with international postsecondary education providers
    and U.S. K-12 schools may be longer than our historical 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 balances are subject to risks which may
    cause losses and affect the liquidity of these
    investments.
  other-than-temporary,
  Our
    future success depends on our ability to continue to retain and
    attract qualified employees.
   46




---



##### 



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. 47




---



##### 



The
    nature of our business and our reliance on intellectual property
    and other proprietary information subjects us to the risks of
    litigation.
    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 of 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.
   48




---



##### 



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.
    U.S.
    and foreign government regulation of our products and services
    could cause us to incur significant expenses, and failure to
    comply with applicable regulations could make our business less
    efficient or even impossible.
    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 Transact
  
    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; 49




---



##### 




    government registration; and
    reporting and documentation requirements.    Item 6.
    Exhibits.    Exhibit No.

Description31
.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.  50




---



##### 



SIGNATURE    Blackboard Inc.
  By:
    /s/  Michael
    J. Beach    (On behalf of the registrant and as Principal
 Financial Officer)
   51