UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, 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
    June 30, 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(State or Other Jurisdiction
    of
    Incorporation or Organization)

52-2081178(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
   1899 L Street, N.W. Washington D.C. 20036
 (Former Address)
   þ o
  Rule 12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
   Class

Outstanding at July 31, 2008Common Stock, $0.01 par value

31,138,810




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##### 





Blackboard
    Inc.
  Quarterly
    Report on
    Form 10-Q
 For the
    Quarter Ended June 30, 2008
  INDEX
   
 PART I. FINANCIAL INFORMATIONItem 1.


Consolidated Financial StatementsConsolidated Balance Sheets as of
    December 31, 2007 and June 30, 2008 (unaudited)


1Unaudited Consolidated Statements of Operations
    for the Three and Six Months Ended June 30, 2007 and
    2008


2Unaudited Consolidated Statements of Cash Flows
    for the Six Months Ended June 30, 2007 and 2008


3Notes to Unaudited Consolidated Financial
    Statements


4Item 2.


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


18Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


32Item 4.


Controls and Procedures


32PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


33Item 1A.


Risk Factors


33Item 4.


Submission of Matters to a Vote of Security
    Holders


42Item 6.


Exhibits


43Signature


44     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,


June 30,2007


2008(Unaudited)Current assets:Cash and cash equivalents

$
206,558


$
55,295Accounts receivable, net of allowance for doubtful accounts of
    $765 and $1,100, respectively


52,846



94,116Inventories


2,089



1,781Prepaid expenses and other current assets


5,255



9,845Deferred tax asset, current portion


6,549



7,213Deferred cost of revenues


6,877



5,854Total current assets


280,174



174,104Deferred tax asset, noncurrent portion


34,154



15,662Investment in common stock warrant






3,980Restricted cash


4,015



4,930Property and equipment, net


18,584



33,310Goodwill


117,502



264,628Intangible assets, net


50,847



94,765Total assets

$
505,276


$
591,379Current liabilities:Accounts payable

$
3,747


$
4,053Accrued expenses


24,182



25,423Deferred rent, current portion


160



336Deferred revenues, current portion


126,600



137,135Total current liabilities


154,689



166,947Convertible senior notes, net of debt discount of $3,481 and
    $2,594, respectively


161,519



162,406Deferred rent, noncurrent portion


1,469



7,479Deferred revenues, noncurrent portion


2,925



5,582Total liabilities


320,602



342,414Commitments 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 31,069,606 shares issued and
    outstanding, respectively


292



311Additional paid-in capital


263,582



330,110Accumulated deficit


(79,200
)


(81,456
)Total stockholders equity


184,674



248,965Total liabilities and stockholders equity

$
505,276


$
591,379    1




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##### 



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


Six Months EndedJune 30,


June 30,2007


2008


2007


2008Revenues:Product

$
52,299


$
68,377


$
102,280


$
131,486Professional services


7,105



7,170



12,404



12,537Total revenues


59,404



75,547



114,684



144,023Operating expenses:Cost of product revenues, excludes $2,928 and $4,572 for the
    three months ended June 30, 2007 and 2008, respectively,
    and $5,749 and $8,660 for the six months ended June 30,
    2007 and 2008, respectively, in amortization of acquired
    technology included in amortization of intangibles resulting
    from acquisitions shown below(1)


11,922



18,000



23,619



33,971Cost of professional services revenues(1)


4,138



5,134



7,902



10,084Research and development(1)


6,999



9,944



13,952



19,677Sales and marketing(1)


16,370



22,763



31,203



43,620General and administrative(1)


8,829



12,461



17,859



25,215Proceeds from patent judgment






(3,313
)






(3,313
)Amortization of intangibles resulting from acquisitions


5,493



9,729



10,892



18,408Total operating expenses


53,751



74,718



105,427



147,662Income (loss) from operations


5,653



829



9,257



(3,639
)Other (expense) income, net:Interest expense


(1,157
)


(1,917
)


(1,915
)


(3,747
)Interest income


507



258



912



1,148Other income


876



3,780



949



4,090Income (loss) before (provision) benefit for income taxes


5,879



2,950



9,203



(2,148
)(Provision) benefit for income taxes


(2,440
)


(1,913
)


(3,820
)


(108
)Net income (loss)

$
3,439


$
1,037


$
5,383


$
(2,256
)Net income (loss) per common share:Basic

$
0.12


$
0.03


$
0.19


$
(0.07
)Diluted

$
0.12


$
0.03


$
0.18


$
(0.07
)Weighted average number of common shares:Basic


28,706,575



30,981,113



28,525,603



30,574,931Diluted


29,860,118



31,939,435



29,774,861



30,574,931(1) Includes the following amounts related to stock-based
    compensation:Cost of product revenues

$
120


$
258


$
249


$
435Cost of professional services revenues


175



69



291



232Research and development


170



190



286



352Sales and marketing


1,152



1,665



1,930



3,081General and administrative


1,401



1,615



2,474



3,378    2




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##### 



BLACKBOARD
    INC.
  UNAUDITED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six MonthsEnded June 30,2007


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

$
5,383


$
(2,256
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Deferred tax benefit


(1,464
)


(2,914
)Excess tax benefit from stock-based compensation


(4,444
)


(1,021
)Amortization of debt discount


806



887Depreciation and amortization


5,164



7,389Amortization of intangibles resulting from acquisitions


10,892



18,408Change in allowance for doubtful accounts


70



335Noncash stock-based compensation


5,230



7,478Gain on investment in common stock warrant






(3,980
)Changes in operating assets and liabilities, net of effect of
    acquisitions:Accounts receivable


(12,332
)


(33,482
)Inventories


525



308Prepaid expenses and other current assets


(2,855
)


(3,516
)Deferred cost of revenues


487



1,023Accounts payable


908



(2,544
)Accrued expenses


4,488



(295
)Deferred rent


39



6,186Deferred revenues


(11,522
)


3,148Net cash provided by (used in) operating activities


1,375



(4,846
)Cash flows from investing activitiesAcquisitions, net of cash acquired






(132,902
)Purchases of property and equipment


(7,089
)


(17,358
)Payments for patent enforcement costs


(2,090
)


(2,448
)Purchase of intangible assets


(1,530
)


Net cash used in investing activities


(10,709
)


(152,708
)Cash flows from financing activitiesPayments on term loan


(24,400
)


Proceeds from notes payable


160,456



Payments on letters of credit


(338
)


(27
)Excess tax benefits from stock-based compensation


4,444



1,021Proceeds from exercise of stock options


7,849



5,297Net cash provided by financing activities


148,011



6,291Net increase (decrease) in cash and cash equivalents


138,677



(151,263
)Cash and cash equivalents at beginning of period


30,776



206,558Cash and cash equivalents at end of period

$
169,453


$
55,295    3




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 For the
    Six Months Ended June 30, 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,
    Blackboard Community
    Systemtm,
    Blackboard Content
    Systemtm,
    Blackboard Outcomes
    Systemtm,
    Blackboard Portfolio
    Systemtm
    Blackboard Transaction
    Systemtm,
    Blackboard
    Onetm, Blackboard
    Connecttm.
  2.
    Basis of
    Presentation  Form 10-Q Regulation S-X.
  Form 10-K
  Principles
    of Consolidation
    Foreign
    Currency Translation
    Use of
    Estimates
    Reclassifications
   4




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fair
    Value Measurements
  Fair Value Measurements
        Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets


Significant Other


Significantfor Identical


Observable


UnobservableAssets


Inputs


InputsJune 30, 2008


(Level 1)


(Level 2)


(Level 3)Assets:Cash equivalents(1)

$
6,531


$
6,531


$



$
Common stock warrant


3,980







3,980



Total Assets

$
10,511


$
6,531


$
3,980


$
Liabilities:Convertible senior notes(2)

$
161,849


$
161,849


$



$
     (1)
    
    Cash equivalents consist of money market funds and debt
    securities 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.  Common
    Stock Warrant
  Accounting for
    Derivative Instruments and Hedging Activity.
 5




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
      Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109 Accounting
    for Income Taxes Accounting for Contingencies
  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.
   6




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##### 



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
  SOP 97-2. time-and-materials
  when-and-if-available SOP 97-2.
  Cost
    of Revenues and Deferred Cost of Revenues
      Basic
    and Diluted Net Income (Loss) per Common Share
   7




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##### 



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


Six Months EndedJune 30,


June 30,2007


2008


2007


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

$
3,439


$
1,037


$
5,383


$
(2,256
)Weighted average shares outstanding, basic


28,706,575



30,981,113



28,525,603



30,574,931Dilutive effect of:Stock options related to the purchase of common stock


1,153,543



958,322



1,249,258



Weighted average shares outstanding, diluted


29,860,118



31,939,435



29,774,861



30,574,931Basic net income (loss) per common share

$
0.12


$
0.03


$
0.19


$
(0.07
)Diluted net income (loss) per common share

$
0.12


$
0.03


$
0.18


$
(0.07
)     Stock-Based
    Compensation
  Share-Based Payment
  Comprehensive
    Net Income (Loss)
    Recent
    Accounting Pronouncements
  Business Combinations.
 8




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    No. 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
  14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion. 14-1). 14-1 14-1 14-1
  3.
    The NTI
    Group, Inc. Merger      Business Combinations
 9




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##### 



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

$
1,592Accounts receivable


8,123Prepaid expenses and other current assets


1,143Restricted cash


888Property 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


143,089Total estimated purchase price

$
187,821        10




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Goodwill and Other Intangible Assets,
    Deferred
    Revenue
  build-up build-up
  Pro
    Forma Financial Information
   11




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##### 



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


Six Months EndedJune 30,


June 30,2007


2008


2007


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

$
66,104


$
75,547


$
127,615


$
147,465Net income (loss)

$
635


$
1,037


$
(1,242
)

$
(3,407
)Basic net income (loss) per common share

$
0.02


$
0.03


$
(0.04
)

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

$
0.02


$
0.03


$
(0.04
)

$
(0.11
)   4.
    Stock-Based
    Compensation  Stock
    Incentive Plans
     12




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (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


1,240,500


$
31.87Exercised


(291,461
)

$
17.72


$
4,873Canceled


(200,071
)

$
29.49Outstanding at June 30, 2008


4,994,705


$
27.13


$
56,434Exercisable at June 30, 2008


2,231,356


$
20.82


$
38,933     Six Months Ended June 30,2007


2008Dividend yield


0
%


0
%Expected volatility


43.6
%


39.6
%Risk-free interest rate


4.6
%


2.9
%Expected life of options


5.1 years



4.9 yearsForfeiture rate


15
%


10.5
%   Dividend yield
  Expected volatility
  Risk-free interest rate
  Expected life of the options Share-Based Payment.
 13




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (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


(10,000
)

$
28.75Outstanding at June 30, 2008


65,000


$
28.75


$
2,485Exercisable at June 30, 2008


      14




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##### 



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


June 30,2007


2008(Unaudited)(In thousands)Raw materials

$
551


$
677Work-in-process


602



540Finished goods


936



564Total inventories

$
2,089


$
1,781   6.
    Goodwill
    and Intangible Assets, Net    December 31,


June 30,2007


2008(Unaudited)(In thousands)Goodwill

$
117,502


$
264,628Acquired 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



8,073Subtotal


108,540



171,120Less accumulated amortization


(57,693
)


(76,355
)Intangible assets, net

$
50,847


$
94,765       7.
    Debt   15




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      EITF 04-8,
    The Effect of Contingently Convertible Instruments on
    Diluted Earnings per Share
       16




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##### 



BLACKBOARD
    INC.
  NOTES TO
    UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    8.
    Commitments
    and Contingencies        9.
    Quarterly
    Financial Information   17




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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
 18




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##### 



Blackboard Academic
    Suitetm, Blackboard Commerce
    Suitetm Blackboard
    Connecttm. Blackboard Learning
    Systemtm Blackboard Community
    Systemtm,
    Blackboard Content
    Systemtm Blackboard Outcomes
    Systemtm,
    Blackboard Portfolio
    Systemtm
    Blackboard Transaction
    Systemtm,
    Blackboard
    Onetm, Blackboard Connect .
                 19




---



##### 



Accounting for Derivative Instruments and
    Hedging Activity.
  Critical
    Accounting Policies and Estimates
      Revenue recognition. 97-2, Software Revenue Recognition, SOP 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition, with Respect to Certain
    Transactions.
     20




---



##### 



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.
  Fair Value Measurements. Fair Value
    Measurements
          Long-lived assets. Accounting for the Impairment or Disposal of Long-Lived
    Assets.
 21




---



##### 



Goodwill and intangible assets. Goodwill
    and Other Intangible Assets.
    Income Taxes.
    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
 22




---



##### 



Recent Accounting Pronouncements. Business
    Combinations
  No. 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
  14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion. 14-1). 14-1 14-1 14-1
  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 23




---



##### 



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.      Results
    of Operations
    Three Months Ended


Six Months EndedJune 30,


June 30,2007


2008


2007


2008(Unaudited)Revenues:Product


88
%


91
%


89
%


91
%Professional services


12



9



11



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


20



24



21



24Cost of professional services revenues


7



7



7



7Research and development


12



13



12



14Sales and marketing


27



30



27



30General and administrative


15



16



16



17Proceeds from patent judgment






(4
)






(2
)Amortization of intangibles resulting from acquisitions


9



13



9



13Total operating expenses


90



99



92



103Income (loss) from operations


10
%


1
%


8
%


(3
)%  24




---



##### 



Three
    Months Ended June 30, 2008 Compared to Three Months Ended
    June 30, 2007
      Three Months Ended June 30,2007


2008Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
43.8


$
0.8


$
44.6


$
58.6


$
1.0


$
59.6Non-recurring ratable revenues


5.7







5.7



6.6







6.6Other revenues


2.8



6.3



9.1



3.1



6.2



9.3Total revenues

$
52.3


$
7.1


$
59.4


$
68.3


$
7.2


$
75.5   Product revenues. Blackboard
    Connect 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 Academic Suite
  Professional services revenues.
 25




---



##### 



Cost of product revenues. Blackboard Connect
    Cost of professional services revenues.
  Research and development expenses.
  Sales and marketing expenses.
  General and administrative expenses.
  Proceeds from patent judgment.
 26




---



##### 



Net interest expense.
  Other income.
    Provision for income taxes.
  Six
    months Ended June 30, 2008 Compared to Six months Ended
    June 30, 2007
      Six Months Ended June 30,2007


2008Professional








ProfessionalProduct


Services





Product


ServicesRevenues


Revenues


Total


Revenues


Revenues


Total(Unaudited)(In millions)Recurring ratable revenues

$
85.9


$
1.5


$
87.4


$
112.3


$
1.8


$
114.1Non-recurring ratable revenues


10.7







10.7



12.2







12.2Other revenues


5.7



10.9



16.6



7.0



10.7



17.7Total revenues

$
102.3


$
12.4


$
114.7


$
131.5


$
12.5


$
144.0   Product revenues. Blackboard Connect Blackboard Learning System
 27




---



##### 



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 Academic Suite
  Professional services revenues.
  Cost of product revenues. Blackboard Connect
    Cost of professional services revenues.
 28




---



##### 



Research and development expenses.
  Sales and marketing expenses.
  General and administrative expenses.
  Proceeds from patent judgment.
  Net interest expense.
  Other income.
   29




---



##### 



Provision for income taxes.
  Liquidity
    and Capital Resources
             30




---



##### 



EITF 04-8, The Effect of Contingently Convertible Instruments on
    Diluted Earnings per Share
         31




---



##### 



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)
 32




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##### 



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    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 NTI products, which are now sold as
    Blackboard Connect,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.
   33




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##### 



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.
   34




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##### 



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.
    The
    accounting method for convertible debt securities with net share
    settlement, like the Notes, has changed.
    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.
   35




---



##### 



Blackboard Academic Suite Blackboard Commerce
    Suite Blackboard Connect 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.
     36




---



##### 



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, 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.
   37




---



##### 




    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.
      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.
  short-term
 38




---



##### 



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.
    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.
   39




---



##### 




    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.
   40




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##### 



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.
    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.   41




---



##### 



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


WithheldElection of DirectorsJoseph L. Cowan


25,937,182



1,547,888E. Rogers Novak, Jr.


26,856,679



628,391William Raduchel


25,439,488



2,045,582   For


Against


AbstainRatification of Selection of Independent Public Accounting
    Firm


26,744,892



695,871



44,303Approval of the Amended and Restated 2004 Stock Incentive
    Plan to increase the number of shares authorized for issuance
    under the plan from 5,800,000 to 8,700,000 and make other
    specified changes


14,961,762



7,193,892



39,774  42




---



##### 



Item 6.
    Exhibits.    Exhibit No.

Description10
.1

Amended and Restated 2004 Stock Incentive Plan.(1)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 Appendix A of the
    Companys Definitive Proxy Statement filed on
    Schedule 14A on April 18, 2008. 43




---



##### 



SIGNATURE    Blackboard Inc.
  By:
    /s/  Michael
    J. Beach    (On behalf of the registrant and as Principal
 Financial Officer)
   44