##### Table of Contents



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, 2007ORo

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
  Rule 12b-2
  þ o o
  Rule 12b-2 o þ
   Class

Outstanding at October 31, 2007Common Stock, $0.01 par value

29,129,752




---



##### 



Blackboard
    Inc.
    Quarterly Report on
    Form 10-Q
    For the Quarter Ended September 30, 2007
    INDEX
  PART I. FINANCIAL INFORMATIONItem 1.


Consolidated Financial StatementsConsolidated Balance Sheets as of
    December 31, 2006 and September 30, 2007
    (unaudited)


1Unaudited Consolidated Statements of Operations
    for the Three and Nine Months Ended September 30, 2006 and
    2007


2Unaudited Consolidated Statements of Cash Flows
    for the Nine Months Ended September 30, 2006 and 2007


3Notes to Unaudited Consolidated Financial
    Statements


4Item 2.


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


13Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


25Item 4.


Controls and Procedures


25PART II. OTHER INFORMATIONItem 1A.


Risk Factors


27Item 6.


Exhibits


36Signature


37Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2     Throughout this Quarterly Report on
    Form 10-Q,
    the terms we, us, our and
    Blackboard refer to Blackboard Inc. and its
    subsidiaries.
 ii




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##### Table of Contents



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


September 30,2006


2007(Unaudited)Current assets:Cash and cash equivalents

$
30,776


$
208,032Accounts receivable, net of allowance for doubtful accounts of
    $767 and $821 at December 31, 2006 and September 30,
    2007, respectively


52,394



65,818Inventories


2,377



2,156Prepaid expenses and other current assets


3,514



5,690Deferred tax asset, current portion


7,326



8,480Deferred cost of revenues, current portion


7,983



8,656Total current assets


104,370



298,832Deferred tax asset, noncurrent portion


25,431



21,619Deferred cost of revenues, noncurrent portion


4,253



3,658Restricted cash


1,999



2,337Property and equipment, net


12,761



16,179Goodwill


101,644



105,730Intangible assets, net


56,841



44,986Total assets

$
307,299


$
493,341Current liabilities:Accounts payable

$
2,238


$
1,116Accrued expenses


20,519



22,194Term loan, current portion


246



Deferred rent, current portion


371



144Deferred revenues, current portion


117,972



130,507Total current liabilities


141,346



153,961Term loan, noncurrent portion, net of debt discount of $777


23,377



Notes payable, net of debt discount of $3,969






161,031Deferred rent, noncurrent portion


157



739Deferred revenues, noncurrent portion


2,298



3,229Commitments and contingencies






Stockholders 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; 28,248,214 and 29,079,610 shares issued and
    outstanding at December 31, 2006 and September 30,
    2007, respectively


282



291Additional paid-in capital


231,331



257,493Accumulated deficit


(91,492
)


(83,403
)Total stockholders equity


140,121



174,381Total liabilities and stockholders equity

$
307,299


$
493,341    1




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##### Table of Contents



BLACKBOARD
    INC.
  UNAUDITED CONSOLIDATED STATEMENTS OF
    OPERATIONS
 (In thousands, except share and per share data)
  Three Months Ended September 30,


Nine Months Ended September 30,2006


2007


2006


2007Revenues:Product

$
43,435


$
53,993


$
113,597


$
156,273Professional services


6,919



7,569



18,046



19,973Total revenues


50,354



61,562



131,643



176,246Operating expenses:Cost of product revenues, excludes $2,800 and $2,928 for the
    three months ended September 30, 2006 and 2007,
    respectively, and $6,533 and $8,676 for the nine months ended
    September 30, 2006 and 2007, respectively, in amortization
    of acquired technology included in amortization of intangibles
    resulting from acquisitions shown below(1)


11,354



11,955



29,348



35,611Cost of professional services revenues(1)


4,385



4,437



12,061



12,339Research and development(1)


8,000



6,927



20,157



20,842Sales and marketing(1)


16,678



18,215



43,920



49,418General and administrative(1)


9,661



10,383



27,063



28,242Amortization of intangibles resulting from acquisitions


5,377



5,496



12,591



16,388Total operating expenses


55,455



57,413



145,140



162,840(Loss) income from operations


(5,101
)


4,149



(13,497
)


13,406Other (expense) income, net:Interest expense


(1,860
)


(1,920
)


(3,756
)


(3,835
)Interest income


341



2,420



1,974



3,332Other (expense) income


(155
)


1,021



(301
)


1,970(Loss) income before benefit (provision) for income taxes


(6,775
)


5,670



(15,580
)


14,873Benefit (provision) for income taxes


2,000



(2,391
)


4,642



(6,211
)Net (loss) income

$
(4,775
)

$
3,279


$
(10,938
)

$
8,662Net (loss) income per common share:Basic

$
(0.17
)

$
0.11


$
(0.39
)

$
0.30Diluted

$
(0.17
)

$
0.11


$
(0.39
)

$
0.29Weighted average number of common shares:Basic


27,922,879



28,956,253



27,760,438



28,668,076Diluted


27,922,879



30,116,974



27,760,438



29,981,276(1) Includes the following amounts related to stock-based
    compensation:Cost of product revenues

$
113


$
183


$
277


$
469Cost of professional services revenues


150



181



519



471Research and development


168



102



444



351Sales and marketing


899



1,248



2,239



3,178General and administrative


931



1,817



2,559



4,292    2




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##### Table of Contents



BLACKBOARD
    INC.
  UNAUDITED CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Nine MonthsEnded September 30,2006


2007(In thousands)Cash flows from operating activitiesNet (loss) income

$
(10,938
)

$
8,662Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Deferred income tax benefit


(6,078
)


(2,278
)Excess tax benefit from stock-based compensation


(248
)


(6,233
)Amortization of debt discount


940



1,352Depreciation and amortization


6,572



7,858Amortization of intangibles resulting from acquisitions


12,591



16,388Change in allowance for doubtful accounts


(143
)


54Noncash stock-based compensation


6,038



8,761Changes in operating assets and liabilities, net of effect of
    acquisitions:Accounts receivable


(30,712
)


(13,478
)Inventories


(637
)


221Prepaid expenses and other current assets


496



(2,176
)Deferred cost of revenues


(1,745
)


(78
)Accounts payable


(575
)


(1,122
)Accrued expenses


(4,883
)


8,038Deferred rent


(142
)


355Deferred revenues


40,048



13,466Net cash provided by operating activities


10,584



39,790Cash flows from investing activitiesAcquisition of WebCT, Inc., net of cash acquired


(154,628
)


Purchases of property and equipment


(8,188
)


(11,154
)Payments for patent enforcement costs






(2,978
)Purchase of intangible assets






(1,530
)Sale of held-to-maturity investments


23,546



Sale of available-for-sale investments


39,056



Net cash used in investing activities


(100,214
)


(15,662
)Cash flows from financing activitiesProceeds from revolving credit facility


10,000



Payments on revolving credit facility


(10,000
)


Proceeds from term loan


57,522



Payments on term loan


(15,450
)


(24,400
)Proceeds from notes payable






160,456Release of letter of credit


1,517



Payments on letters of credit






(338
)Excess tax benefits from stock-based compensation


248



6,233Proceeds from exercise of stock options


6,943



11,177Net cash provided by financing activities


50,780



153,128Net (decrease) increase in cash and cash equivalents


(38,850
)


177,256Cash and cash equivalents at beginning of period


75,895



30,776Cash and cash equivalents at end of period

$
37,045


$
208,032    3




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BLACKBOARD
    INC.
  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 For the
    Nine Months Ended September 30, 2006 and 2007
  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 and Blackboard
    Onetm
  2.
    Basis of
    Presentation  Form 10-Q Regulation S-X.
  Form 10-K
  Principles
    of Consolidation
    Foreign
    Currency Translation
    Use of
    Estimates
    Fair
    Value of Financial Instruments
  Disclosures about Fair Value of Financial
    Instruments,
 4




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##### Table of Contents



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Deferred
    Income Taxes
      Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109 Accounting for
    Income Taxes.
  Cost
    of Product Revenues
    Basic
    and Diluted Net (Loss) Income per Common Share
   5




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


Nine Months EndedSeptember 30,


September 30,2006


2007


2006


2007(Unaudited)(In thousands, except share and per share amounts)Net (loss) income

$
(4,775
)

$
3,279


$
(10,938
)

$
8,662Weighted average shares outstanding, basic


27,922,879



28,956,253



27,760,438



28,668,076Dilutive effect of:Stock options related to the purchase of common stock






1,160,721







1,313,200Weighted average shares outstanding, diluted


27,922,879



30,116,974



27,760,438



29,981,276Basic net (loss) income per common share

$
(0.17
)

$
0.11


$
(0.39
)

$
0.30Diluted net (loss) income per common share

$
(0.17
)

$
0.11


$
(0.39
)

$
0.29   Stock-Based
    Compensation
  Share-Based
    Payment
  Comprehensive
    Net (Loss) Income
    Recent
    Accounting Pronouncements
  Fair Value Measurements
  The Fair Value Option for Financial Assets and
    Financial Liabilities
 6




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##### Table of Contents



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    3.
    WebCT,
    Inc. Merger    Business Combinations
      4.
    Stock-Based
    Compensation    Nine Months Ended September 30,2006


2007Dividend yield


0
%


0
%Expected volatility


42.0
%


42.7
%Risk-free interest rate


4.8
%


4.6
%Expected life of options


4.9 years



5.1 yearsForfeiture rate


10
%


15
%   Dividend yield
  Expected volatility
 7




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##### Table of Contents



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Risk-free interest rate
  Expected life of the options Share-Based Payment.
  Forfeiture rate
        Number of


Weighted Average


AggregateShares


Price/Share


Intrinsic ValueOptions exercisable at December 31, 2006


1,810,267


$
11.85Options outstanding at December 31, 2006


3,922,045


$
18.76Granted


1,392,750


$
34.46Exercised


(824,487
)

$
13.38


$
20,000Canceled


(154,885
)

$
23.89Options outstanding at September 30, 2007


4,335,423


$
24.65


$
91,856Options exercisable at September 30, 2007


1,746,938


$
16.31


$
51,596    8




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##### Table of Contents



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


September 30,2006


2007(Unaudited)(In thousands)Raw materials

$
799


$
804Work-in-process


658



654Finished goods


920



698Total inventories

$
2,377


$
2,156  9




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##### Table of Contents



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


September 30,2006


2007(Unaudited)(In thousands)Goodwill

$
101,644


$
105,730Acquired technology

$
44,107


$
45,637Contracts and customer lists


45,042



45,042Non-compete agreements


2,043



2,043Trademarks and domain names


71



71Patents and related costs


944



4,071Subtotal


92,207



96,864Less accumulated amortization


(35,366
)


(51,878
)Intangible assets, net

$
56,841


$
44,986           7.
    Credit
    Facilities     10




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##### Table of Contents



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
               11




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BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  8.
    Commitments
    and Contingencies    9.
    Quarterly
    Financial Information   12




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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 Learning
    Systemtm,
    Blackboard Community
    Systemtm,
    Blackboard Content
    Systemtm,
    Blackboard Outcomes
    Systemtm Blackboard Portfolio
    Systemtm,
    Blackboard Transaction
    Systemtm and Blackboard
    Onetm
       13




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Critical
    Accounting Policies and Estimates
      Revenue recognition.
 14




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##### Table of Contents



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
  time-and-materials
  when-and-if-available SOP 97-2.
  Allowance for doubtful accounts.
  Long-lived assets. Accounting for the Impairment or Disposal of Long-Lived
    Assets.
 15




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Purchase Accounting and Goodwill. Goodwill and
    Other Intangible Assets.
  Deferred Income Taxes.
    Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109 Accounting for
    Income Taxes
  Stock-Based Compensation. Share-Based Payment Accounting for Stock-Based Compensation
   16




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Recent Accounting Pronouncements. Fair
    Value Measurements
  The Fair Value Option for Financial Assets and
    Financial Liabilities
  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
    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, as well as the supplies and commissions we earn from
    publishers related to digital course supplement downloads.     17




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Results
    of Operations
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2007


2006


2007(Unaudited)Revenues:Product


86
%


88
%


86
%


89
%Professional services


14



12



14



11Total 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


22



19



22



20Cost of professional services revenues


9



7



9



7Research and development


16



11



15



12Sales and marketing


33



30



33



28General and administrative


19



17



21



16Amortization of intangibles resulting from acquisitions


11



9



10



9Total operating expenses


110



93



110



92(Loss) income from operations


(10
)%


7
%


(10
)%


8
%   Three
    Months Ended September 30, 2007 Compared to Three Months
    Ended September 30, 2006
      Three Months Ended September 30,2006


2007Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
34.7


$
0.6


$
35.3


$
45.2


$
0.8


$
46.0Non-recurring ratable revenues


5.4







5.4



5.5







5.5Other revenues


3.3



6.3



9.7



3.3



6.8



10.1Total revenues

$
43.4


$
6.9


$
50.4


$
54.0


$
7.6


$
61.6   Product revenues. Blackboard
    Learning System Blackboard Learning
    System Blackboard Learning System
 18




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Blackboard Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning
    System
  Blackboard Commerce
    Suite
  Blackboard Academic Suite
  Professional services revenues.
  Cost of product revenues. Blackboard Transaction
    System
   19




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Cost of professional services revenues.
  Research and development expenses.
  Sales and marketing expenses.
  General and administrative expenses.
  Net interest (expense) income.
  Other (expense) income.
  Benefit (provision) for income taxes.
  Nine
    Months Ended September 30, 2007 Compared to Nine Months
    Ended September 30, 2006
   20




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##### Table of Contents



Nine Months Ended September 30,2006


2007Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
91.5


$
1.4


$
92.9


$
131.1


$
2.3


$
133.4Non-recurring ratable revenues


14.6







14.6



16.2







16.2Other revenues


7.5



16.6



24.1



9.0



17.6



26.6Total revenues

$
113.6


$
18.0


$
131.6


$
156.3


$
19.9


$
176.2   Product revenues. Blackboard
    Learning System Blackboard
    Learning System Blackboard Learning
    System Blackboard
    Learning System Blackboard
    Learning System Blackboard Learning System Blackboard Learning System Blackboard Learning
    System Blackboard Learning System
  Blackboard Commerce
    Suite
  Blackboard One
  Blackboard Academic Suite
  Professional services revenues.
 21




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##### Table of Contents



Cost of product revenues. Blackboard Transaction System
    Cost of professional services revenues.
  Research and development expenses.
 22




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Sales and marketing expenses.
  General and administrative expenses.
  Net interest expense.
  Other (expense) income.
  Benefit (provision) for income taxes.
  Liquidity
    and Capital Resources
       23




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24




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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)
 25




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##### Table of Contents



(b)  Changes
    in Internal Control over Financial Reporting.
  Rules 13a-15(f) 15d-15(f)
 26




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##### Table of Contents



PART II.
    OTHER INFORMATION
  Item 1A.
    Risk
    Factors.  Our
    merger with WebCT 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 increase in our revenues if a
    larger than predicted number of customers decline to renew their
    contracts, if we are unable to sell WebCTs products to our
    customer base or if the acquired contracts do not allow us to
    recognize revenues on a timely basis;
    we may have difficulty incorporating WebCTs technologies
    or products with our existing product lines and maintaining
    uniform standards, controls, procedures and policies;
    we may have higher than anticipated costs in continuing support
    and development of WebCTs products;
    we may lose anticipated tax benefits or have additional legal or
    tax exposures;
    we may not be able to retain key WebCT employees;
    we may face contingencies related to product liability,
    intellectual property, financial disclosures, and accounting
    practices or internal controls; and
    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.  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.
         27




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Our
    indebtedness could adversely affect our financial condition and
    prevent us from fulfilling our debt obligations, including 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 by 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.
    Provisions
    of the Notes could discourage an acquisition of us by a third
    party.
    Conversion
    of the Notes may affect the market price of our common stock and
    may dilute the ownership of existing stockholders.
   28




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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.
      Most
    of our clients use our products to facilitate online education,
    which is a relatively new field; if online education does not
    continue to develop and gain acceptance, demand for our products
    could suffer.
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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
    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.
    Because
    most of our licenses are renewable on an annual basis, a
    reduction in our license renewal rate could significantly reduce
    our revenues.
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If our
    newest product, the Blackboard Outcomes System, does not gain
    widespread market acceptance, our financial results could
    suffer.
    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.
    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 or if new product releases are delayed,
    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. 31




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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.    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.
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Our
    future success depends on our ability to continue to retain and
    attract qualified employees.
    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.
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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.  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.
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Operational
    failures in our network infrastructure could disrupt our remote
    hosting service, could cause us to lose current hosting clients
    and sales to potential hosting clients and could result in
    increased expenses and reduced revenues.
    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
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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
  
    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 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.  36




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SIGNATURE
    Blackboard Inc.
  By:
    /s/  Michael
    J. Beach    (On behalf of the registrant and as Principal
 Financial Officer)
   37