UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  May 1, 2008

DIGIMARC CORPORATION

(Exact name of registrant as specified in its charter)

9405 SW Gemini Drive, Beaverton Oregon 97008

(Address of principal executive offices) (Zip Code)

(503) 469-4800

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x          Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.        Results of Operations and Financial Condition

On May 1, 2008, Digimarc Corporation issued a press release announcing its financial results for the quarter ended March 31, 2008.  The full text of the press release is attached hereto as Exhibit 99.1.

Item 9.01.        Financial Statements and Exhibits

(d) Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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DIGIMARC CORPORATION

FORM 8-K

INDEX TO EXHIBITS

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Exhibit 99.1

Michael McConnell

Chief Financial Officer and Treasurer

503-469-4652

mmcconnell@digimarc.com

Leslie Constans

Digimarc Public Relations

503-469-4620

lconstans@digimarc.com

FOR IMMEDIATE RELEASE

Digimarc Reports First Quarter Results

Company Reports Record Revenues and Strong Growth in Backlog

Beaverton, Ore. – May 1, 2008 – Digimarc Corporation (NASDAQ: DMRC) today announced financial results for the first quarter ended March 31, 2008, reporting record revenues and near record-level back log.

First quarter revenues totaled $30.6 million, 14% higher than revenues of $26.8 million in the comparable period of 2007. ID Systems revenues grew 9%.  Digital Watermarking revenues increased 46% year-over-year.  First quarter net loss of $(1.4) million, or $(0.06) per fully diluted share, included $1.1 million of costs related to the pending sale of Digimarc’s ID Systems business to L-1 Identity Solutions.  This compares to a net loss of $(1.0) million, or $(0.05) per fully diluted share, for the same period a year earlier.  Operating expenses for the first quarter, including merger-related costs, were $13.5 million compared to $11.4 million in expenses incurred in the first quarter of 2007.  Cash flow from operations for the first quarter was $8.6 million, a $3.2 million improvement over $5.4 million in the first quarter of 2007.

The Company generated Adjusted EBITDA for the first quarter of $3.9 million, or 13% of revenues, an improvement of $0.4 million from $3.5 million in the first quarter of 2007.  Digimarc calculates Adjusted EBITDA by adjusting net income (loss) for the effects of interest, taxes, depreciation, amortization and non-cash expenditures for stock compensation. The reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP measure, is included at the end of this release.

Digimarc reported its backlog is approaching record levels, with a quarter end balance of approximately $280 million.  The $65 million backlog for Digital Watermarking accounted for nearly one quarter of the total.

Recent business highlights

·                  Digimarc’s ID Business to be acquired by L-1 Identity Solutions for approximately $250 million in cash and stock, based on the value of L-1 common stock at the time of the announcement of the transaction

·                  Mexico Awards New Voter ID Contract to Digimarc

·                  Nevada Approves $29 Million Contract Extension with Digimarc for Highly Secure Driver License System

·                  Digimarc CEO Featured in Inside Digital Media Webcast “Watermarking Comes of Age”

·                  Digimarc Delivers First Enhanced Driver Licenses in North America

See Digimarc’s website at www.digimarc.com for further details.

Conference Call

Digimarc will hold its first quarter earnings conference call on Thursday, May 1, at 8:00 a.m. PT / 11:00 a.m. ET. The call will be open to the general public and the media, and will be broadcast live by webcast at www.digimarc.com and www.earnings.com. At Digimarc’s web address, the call will be available by clicking the “Q1 Earnings Release Conference Call” webcast link on the “Investor Events” page within the “Investors” section. This webcast will also be available for later listening at both sites for two weeks following the live call.  Thereafter, the webcast will be archived and available at http://www.digimarc.com/investors/call_archive.asp.

About Digimarc

Digimarc Corporation (NASDAQ: DMRC), based in Beaverton, Oregon, is a leading supplier of secure identity and media management solutions. Digimarc provides products and services that enable the annual production of more than 60 million personal identification documents, including two-thirds of U.S. driver licenses and IDs for more than 25 countries. Digimarc’s digital watermarking technology provides a persistent digital identity for various media content and is used to enhance the security of financial documents, identity documents and digital images, and support other media rights management applications.

Digimarc has an extensive intellectual property portfolio, with more than 360 issued U.S. patents with more than 7,500 claims, and more than 500 pending U.S. and foreign patent applications in digital watermarking, personal identification and related technologies. The Company is headquartered in Beaverton, Oregon, with other U.S. offices in Burlington, Massachusetts; Fort Wayne, Indiana; and the Washington DC area; and international offices in London and Mexico. Please go to www.digimarc.com for more company information.

Securities Safe Harbor

With the exception of historical information contained in this release, the matters described herein contain certain “forward-looking statements” that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements containing the words “believes,” “expects,” “estimates,” “anticipates,” “will”, “to be” or words of similar import or statements of management’s opinion. These statements are subject to certain assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied from the statements herein or from historical results, due to changes in economic, business, competitive, technological and/or regulatory factors. More detailed information about risk factors that may affect actual results is set forth in filings by Digimarc with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K, including but not limited to those described in the Company’s Form 10-K for the year ended December 31, 2007 in Part II, Item 7 thereof (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) under the captions “Liquidity and Capital Resources” and “Factors Affecting Forward Looking Statements” and in Part II, Item 9A thereof (“Controls and Procedures”). Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date of this release. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

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Digimarc Corporation

Income Statement Information

(in thousands, except per share amounts)

(Unaudited)

Digimarc Corporation

Revenue by Source

(in thousands, except per share amounts)

(Unaudited)

Digimarc Corporation

Cost of Revenue

(in thousands)

(Unaudited)

Digimarc Corporation

Balance Sheet Information

(in thousands)

(Unaudited)

Digimarc Corporation

Cash Flow Information

(in thousands)

(Unaudited)

Digimarc Corporation

Reconciliation of GAAP and Non-GAAP Financial Measures

Adjusted EBITDA

(in thousands)

(Unaudited)

About Adjusted EBIDTA

From time to time, we may refer to Adjusted EBITDA in our conference calls and discussions with analysts in connection with our historical financial results and our guidance for future periods. Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not a measure derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to Adjusted EBITDA). The reconciliation of GAAP and Non-GAAP Financial Measures for the three months ended March 31, 2008 is included in the above table. Management of the Company believes that Adjusted EBITDA is helpful to investors as an indicator of the current financial performance of the Company and its capacity to fund capital expenditures and working capital requirements. Due to the nature of the Company’s government programs business and revenue recognition policies and the Company’s use of stock-based employee compensation, the Company incurs significant non-cash charges for depreciation, amortization and stock compensation expense that may not be indicative of our operating performance from a cash perspective. Therefore, the Company believes that providing the measure of Adjusted EBITDA will help investors better understand the Company’s underlying financial performance and ability to generate cash flow from operations.